Medicare will pay two very different rates for the same exact service performed on nearly identical patients in two offices that share a wall in a strip mall professional office building. One, lower rate is paid for physician owned entities while a much higher rate is paid to the office that is classified as a hospital outpatient location. These two locations may have the same doctors working in the suites. The only meaningful difference that drives significant payment deltas is the ownership structure.
For the health policy geeks, the following tweet is huge news:
Medicare's 2019 hospital outpatient rule is finally out, and it includes site-neutral payments for hospitals/clinics: https://t.co/9uPAgXsI1y
— Bob Herman (@bobjherman) July 25, 2018
The 2015 budget deal had started the process of going towards site neutrality by stopping the payment bump from going to locations that were bought after the bill was signed into law. It grandfathered the older facilities and their payment bump. This is a much bigger deal. It is a proposed rule change that will attempt to equalize payments that occur in the outpatient setting without regard to ownership structure.
This is good policy from Health and Human Services.
It is also a policy proposal that will create a massive lobbying battle.
(Disclaimer: I work for Duke University which is significantly entangled with Duke University Health System. I imagine DUHS financial analysts are on their 11th cup of coffee this morning trying to figure out what the rule means to DUHS. I imagine that the rule would be a significant swing in revenue one way or another).
In 2016, HHS issued a draft rule that attempted to remove some of the perverse incentives of Medicare Part B drug administration. The existing rule that they wanted to change had Medicare pay doctors the average price of an office administered drug plus six percent. This creates a strong incentive for doctors to choose more expensive drugs if there clinically viable alternatives as the check which flows from six percent of a big price is bigger than the check that flows from six percent of a small price. HHS proposed to significantly reduce the percentage kicker while adding a flat fee administration fee. This would change the perverse incentive. The rule died as there was a massive howl of protest from the doctors who routinely prescribed the high cost drugs (oncology is a big field).
I think that the same dynamic will be in play with this rule. HHS is trying to remove a perverse incentive. This rule change will create winners and losers. I think the losers will scream far more loudly than the winners.
If HHS can get this rule through or at least something substantially similar to it, this would be a significant improvement in payment policy but the politics and power dynamics are going to be tough.
p.a.
1) Any chance this passage would incentivize (sorry, horrid word) Dr. opt-outs from treating MCare subscribers, or is it just too big a market to pass up?
2) Off-topic, but we know there are nonprofit hospitals and for-profits. I’ve also seen the term not-for-profit (not necessarily in ref to hospitals) Is nonprofit =/= not-for-profit? Tax lawyers in the audience?
Wag
Here at my academic medical center there are two seperate billing groups, the University Faculty group, and the University Hospital group. The Faculty practices operate under the hospital, billing facility fees in addition to the E+M codes. The Hospital practices do not bill the facility fee. It will be interesting to see how quickly the Faculty practices are transitioned away from billing the facility fees.
OT, but what re your thoughts about the Trump proposal to allow only a single level of payment for Medicare E+M services? It strikes me as a major disruption to out current medical model with significant impacts on MC providers and provider availability for MC patients.
David Anderson
@Wag: Regarding uniform E&M codes, I don’t know enough to have a strong opinion.
Betsy
Both site of service differential payments and ACOs encourage hospitals to employ physicians. No doubt it increases overall costs. But, the first provider based groups I worked with were formed by small, rural hospitals to keep physicians working in their towns. Time after time, primary care physicians came with a two year salary guarantee, couldn’t make a living off Medicare and Medicaid rates and had a high percentage of those populations, and the hospital stabilized the provision of care by employing the primary care doctors. This was in the late 80s and early 90s.
Mel
This is a GREAT policy tweak.
The “hospital facility” vs. “office facility” based fee structure for tests and outpatient treatments is absolutely ridiculous. It has nothing to do with the quality of the facility or the level of technology available at any particular office, treatment or testing facility – quite simply, it is an arbitrary money grab. Even for something as simple as an ultrasound, the difference in price for the very same service can be $125 or more out of pocket cost at a “hospital facility” on many insurance plans. And it just gets worse from there.
For example, if I had an infusion of a particular chemo /immunosuppressive med at my physician’s office, it would be appx. $150 for the infusion services (plus a $7,000 copay for the med, but that’s another story entirely). Unfortunately, they don’t carry that med for infusions b/c they don’t have enough patients on it to justify the waste factor of unused medication. So, they set it up at the umbrella medical group’s infusion center, a freestanding facility.
Even though both offices are owned by the same med group, and the exact same procedure, medication, supplies, type of staff, and monitoring would be utilized, the infusion services fee would be between $2,000 and $3,000 at the infusion office, solely because the med group bills it as a “hospital facility”.
That’s correct: $150 at one building; $2,000 – $3,000 at another building, with the only difference being a code that is inputted by the billing department when the claim is submitted.
Add to that the fact that most customer service reps at insurance companies do not understand how to navigate this issue with outpatient fee and classification structures, and it often can be almost impossible to find out beforehand HOW each facility is classified.
Despite trying to find out, many patients in urgent situations end up having to have a test done while the facility and insurance company are still dithering around claiming that nobody is certain how the facility is classified, and the patients end up being directed to a “hospital facility” and thus end up with a whopper of a bill.
In my youth, I worked in insurance and workers’ compensation, so I have a slightly better grasp of how to navigate the system than a patient who has never dealt with the system before.
Even so, it took my doctor, her infusion nurse, the managing nurse at the infusion center, and the one halfway competent supervisor that we encountered at my insurance company a three month battle to try to sort out actual classifications and cost quotes. Only after my doctor involved a patient navigator from another practice were we able to get an answer, and only after the navigator got someone at the actual pharmaceutical company to deal with finding out the costs. Bizarre, stressful, wasteful, and should have been entirely unnecessary to resort to such extreme measures in the first place.
It was a nightmare, and one that many people go through every day, often when they are already ill, frightened, and overwhelmed.
Our favorite quote was from the med group’s own billing supervisor, who said, “We can’t be sure how it will shake out, but you need the treatment, so just go ahead and get it and you’ll find out the billing code and the cost when the bill comes.” Favorite insurance company statement: ”You can always just go ahead and do the treatments, and if it bills as a hospital facility, you can challenge it and then go through appeals to ask us to please cover it at the lower level, but nobody can say what they might or might not decide…”
Getting rid of the arbitrary classifications and equalizing the fee structure will prevent exactly that kind of subterfuge, confusion, and wasting of patients’ vital time and money, especially in cases where access to the tests or treatments are on an urgent need basis.
Barbara
@Wag: Single E&M payment: I am going to guess that the confusion over E&M code levels has finally worn away CMS’ ability to deal with it. IMO, instead of 5 levels, they might want to have three levels: 1 = an E&M service with “incident to” billing and/or level of effort; 3 = new patient and 2 = everyone else. The gradation of differences between 2-4 are just not easily explained, and a lot of physicians more choose one level for everyone who is not new, and that’s 3 or 4.