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 

Doctor or Money Shortage in California?

An LA Times article titled “California doesn’t have enough doctors. To recruit them, the state is paying off medical school debt” describes a program where the State of California will pay off student debts using Proposition 56 tobacco tax revenue (1). California’s program is aimed at increasing the number of doctors who see Medi-Cal patients which has not kept pace with the rapid expansion of the state’s healthcare program for the poor, which now covers 1 in 3 residents in the state. The trends of decreasing doctors who accept Medi-Cal along with the increasing number of Medi-Cal patients led healthcare, education and business leaders to form the California Future Health Workforce Commission (CFHWC) in 2017 to study the state’s impending healthcare crisis (2). The CFHWC task force ultimately proposed a $3-billion plan over the next 10 years including $120 million for loan forgiveness incentives that’s meant to ensure physicians and dentists take on Medi-Cal patients. Another component of the program would allow nurse practitioners to practice independently from physicians.

The program is telling of both education and reimbursement in California. The CFHWC task force states that California is experiencing a shortage of doctors (3). This is not true. It is true that the graduation of doctors has not kept pace with the expanding California population. The national average of medical school students per 100,000 people is 30.3; California has 18.4 students per 100,000 (1,3). That’s the third-lowest rate among the 45 states that have at least one medical school. California has made relatively few investments in increasing enrollment at medical schools in the state. The only new public medical school to open in California in the last four decades is at UC Riverside and class size has only slightly expanded in the other schools (1,3). At the same time, more than one-third of the state’s doctors and nurse practitioners are reaching retirement age (1).

More than 60% of California’s students who attended medical school in 2017 left the state for their residency, according to the commission’s report. Most doctors settle near their residencies and California must expand the number of residency positions offered according to the CFHWC task force (1,3). They added that the state has historically underfunded those programs (1,3).

Despite these deficiencies, California does not have a shortage of doctors compared to other states (Table 1).

Table 1. Number of physicians per 100,000 population (Phys/10⁵ Pop) by state (2016 data, 4).

In 2016 California ranked nineteenth of the fifty states in numbers of physicians per 100,000 population (4). In addition, it ranked 22^nd in active primary care physicians (4).

What the CFHWC task force really means (and says intermittently) is that the number of doctors willing to accept Medi-Cal payment is low. The reason for this is pretty simple, Medi-Cal reimbursement is abysmally small. For a routine office call (CPT code 99213) Medi-Cal reimburses $24.00 (5). This office code is for about 15 minutes of patient contact and must include: 1. an expanded problem focused history, 2. an expanded problem focused examination, and 3. medical decision making of low complexity. This might be difficult to accomplish in 15 minutes. Documentation and billing would require at least 5 minutes more if the physician is a lightning fast typist. In contrast, Medicare pays $77.72 and Arizona Health Care Cost Containment System (AHCCCS) Administration (Arizona’s Medicaid) pays $51.42. Income generated from a busy practice seeing only Medi-Cal patients at $24.00 per office visit would mean $72/hour, about $500/day (7 hours/day), $2500 per week ($500/day X 5 days a week) or about $120,000/year (48 weeks). Although office overhead (payroll, rent, vendors, information technology, insurance, office equipment, etc.) varies widely, in 2002 the average general internist’s office overhead was about $250,000 (6). Expenses have not likely decreased in the last 16 years meaning that under the very best of circumstances, a physician seeing only Medi-Cal patients would lose $130,000/year serving California’s poor.

Medi-Cal has seemed to attempt to place the financial burden of caring for the poor on physicians and nurse practitioners rather than solving the problem of low reimbursement. Recent residency graduates who agree to have their debt relieved by California in exchange for seeing Medi-Cal patients may find their debt increasing under California’s proposal. Cuts could be made in other areas (hospital costs, drugs, etc.) but ultimately it seems that adequate reimbursement will be necessary to solve the impending “healthcare crisis”.

Richard A. Robbins, MD

Editor, SWJPCC

References

1. Gutierrez M. California doesn’t have enough doctors. To recruit them, the state is paying off medical school debt. LA Times. July 16, 2019. Available at: https://www.latimes.com/politics/la-pol-ca-california-doctor-shortage-medical-debt-20190716-story.html (accessed 7/19/19).
2. Gutierrez M. $3 billion is needed to address California’s doctor shortage, task force says. LA Times. February 5, 2019. Available at: https://www.latimes.com/politics/la-pol-ca-california-future-health-workforce-commission-doctor-shortage-20190205-story.html (accessed 7/19/19).
3. Mijic V. Meeting the demand for health: fact sheet on California’s looming workforce crisis. California Future Health Workforce Commission. February 4, 2019. Available at: https://futurehealthworkforce.org/2019/02/04/ca-looming-workforce-crisis/ (accessed 7/19/19).
4. American Association of Medical Colleges. 2017 State Physician Workforce Data Report. Available at: https://store.aamc.org/downloadable/download/sample/sample_id/30/ (accessed 7/19/19).
5. Department of Healthcare Services Medi-Cal. Medi-Cal rates as of 07/15/2019 (codes 94799 thru 99600). Available at: https://files.medi-cal.ca.gov/pubsdoco/rates/rates_information.asp?num=22&first=94799&last=99600 (accessed 7/19/19).
6. Weiss GG. Expense survey: what it costs to practice today. Med Econ. 2002 Dec 9;79(23):36-8, 41. [PubMed]

Cite as: Robbins RA. Doctor of money shortage in California? Southwest J Pulm Crit Care. 2019;19(1):15-7. doi: https://doi.org/10.13175/swjpcc050-19 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 

Medi-Cal Blamed for Poor Care in Lawsuit

Several sources are reporting a lawsuit filed in California alleging poor care in the state’s Medicaid program, Medi-Cal (1). The suit alleges that Medi-Cal failed to pay doctors enough to provide proper care. The suit was filed by five Latino residents on behalf of California’s 13 million lower-income residents, more than half of them Latinos. The suit alleges that "…California has created a separate and unequal system of health care, one for the insurance program with the largest proportion of Latinos (Medi-Cal), and one for the other principal insurance plans, whose recipients are disproportionately white.”

The state budget includes $107 billion in state and federal funding for Medi-Cal this year, but the spending is not enough to restore reimbursement cuts made during the Great Recession of 2008. A proposal in the U.S. Senate to repeal the Affordable Health Care law (ACA, Obamacare) could drastically reduce funding for Medicare and the individuals who can access it.

Thomas Saenz, an attorney with the Mexican American Legal Defense and Educational Fund who filed the lawsuit, said he believes it is the first time the civil rights approach has been tried in California. According to Saenz this legal approach is possible because California is one of the few states to specifically prohibit discriminatory effects in state programs.

Other states in the Southwest also have disproportionately large Hispanic populations in their Medicaid programs (Table 1).

Table 1. Percent Caucasian and Hispanic total population/Medicare population by State (2,3).

Reimbursement does appear disproportionately low in California which ranked 48th in the nation in 2015 in how much it paid hospitals, doctors and other healthcare providers for treating Medi-Cal patients, according to the Kaiser Family Foundation (4). In the Southwest the state with the highest reimbursement was Nevada (5-10). California reimbursement averaged only 47% of Nevada reimbursement for the procedures listed (Table 2).

Table 2. Medicare reimbursement for common procedures by state (4-9).

The reason for the wide differences in reimbursement rates is unclear but is likely historical dating back to cost containment programs from the 1980’s and 90’s (11). The differences do not appear to be explained by differing costs of living. None of the procedure reimbursements correlated with the cost of living in the largest city in each state (Phoenix, Los Angeles, Denver, Albuquerque, Honolulu, and Las Vegas, p>0.1, all comparisons).

The chances of the lawsuit’s success are unclear since there is no precedent. However, it seems likely that if the suit is successful, more suits will be filed since California Medi-Cal’s situation of disproportionately providing care to minorities is not unique.

Richard A. Robbins, MD

Editor, SWJPCC

References

1. Thompson D. Latino plaintiffs sue California alleging poor health care. Associated Press. July 12, 2017. Available at: http://abcnews.go.com/Health/wireStory/latino-plaintiffs-sue-california-alleging-poor-health-care-48592841 (accessed 7/13/17).
2. Kaiser Family Foundation. Population distribution by race/ethnicity. 2015. Available at: http://www.kff.org/other/state-indicator/distribution-by-raceethnicity/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D (accessed 7/13/17).
3. Kaiser Family Foundation. Distribution of the nonelderly with Medicaid by race/ethnicity. 2015. Available at: http://www.kff.org/medicaid/state-indicator/distribution-by-raceethnicity-4/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D (accessed 7/13/17).
4. Dickson V. Low Medi-Cal payments could weaken expanded coverage for undocumented children. Modern Healthcare. June 17, 2015. Available at: http://www.modernhealthcare.com/article/20150617/NEWS/150619908 (accessed 7/13/17).
5. California Department of Health Care Services Medi-Cal. Medi-Cal Rates. June 15, 2017. Available at: https://files.medi-cal.ca.gov/pubsdoco/rates/rateshome.asp (accessed 7/13/17).
6. Arizona Health Cost Containment System. Physician fee schedules. 2017. Available at: https://www.azahcccs.gov/PlansProviders/RatesAndBilling/FFS/Physicianrates/ (accessed 7/13/17).
7. Colorado Department of Health Care Policy and Financing. Provider rates & fee schedule. June 2017. Available at: https://www.colorado.gov/pacific/hcpf/provider-rates-fee-schedule (accessed 7/13/17).
8. Quest Hawai’i. Medicaid fee schedule. 2013. Available at: http://www.med-quest.us/ (accessed 7/13/17).
9. Nevada Division of Health Care Financing and Policy. Fee schedules. Available at: http://dhcfp.nv.gov/Resources/Rates/FeeSchedules/ (accessed 7/13/17).
10. New Mexico Human Services Department. New Mexico Medicaid fee for service CPT code fee schedule. 2017. Available at: http://www.hsd.state.nm.us/uploads/FileLinks/e7cfb008157f422597cccdc11d2034f0/7.17_CPT_Codes__2_.pdf (accessed 7/13/17).
11. Tatar M, Paradise J, Grafield R. Medi-Cal managed care: an overview and key issues. Kaiser Family Foundation. Mar 02, 2016. Available at: http://www.kff.org/report-section/medi-cal-managed-care-an-overview-and-key-issues-issue-brief/ (accessed 7/13/17).

Cite as: Robbins RA. Medi-Cal blamed for poor care in lawsuit. Southwest J Pulm Crit Care. 2017;15(1):42-4. doi: https://doi.org/10.13175/swjpcc091-17 PDF