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Medicare “Site Neutral” Reimbursements Hit Hospitals Hard, But Is It Legal?

Shockingly, not all new rules that emerge from the Center for Medicare and Medicaid Services (CMS) are actually compliant with the law. Wait! What? How can CMS publish Final Rules that are not compliant with the law?

This was an eye-opening discovery as a “baby lawyer” back 20 years ago. The government can and does publish and create Rules that, sometimes, exceed its legal authority. Of course, the Agency must follow appropriate rule-making procedure and allow for a comment period (etc.), but CMS does not have to listen to the comments. Theoretically, CMS could publish a Final Rule mandating that all Medicare providers provide 50 hours of free services a year or that the reimbursement rate for all services is $1. Both of my examples violate multiple rules, regulations, and laws, but until an aggrieved party with standing files a lawsuit declaring the Final Rule to be invalid or Congress passes a law that renders the Rule moot, the Rule exists and can be enforced by CMS and its agents.

The Rule-change (the “Site-Neutrality Rule”), which became effective January 1, 2019, reduced Medicare reimbursements to hospitals with outpatient facilities. Medicare will pay hospitals that have outpatient facilities “off campus” at a lower rate — equivalent to what it pays independent physicians for clinic visits. This decrease in Medicare reimbursements hits hard for most hospitals across the country, but, especially, rural hospitals. For the past 10+ years, hospitals have built outpatient facilities to serve more patients, and been reimbursed a higher Medicare reimbursement rate than independent physicians because the services at the hospital’s outpatient facility were connected to an outpatient facility affiliated with a hospital. Now the Site-Neutrality Rule leaves many hospitals trying to catch their breaths after the metaphoric punch to the belly. On the other hand, independent physicians claim that they have been providing the exact, same services as the hospital-affiliated outpatient facilities for years, but have received a lower reimbursement rate. I have no opinion (I do, but my opinion is not the topic in this blog) as to whether physicians and hospitals should be reimbursed equally – this blog is not pro-physician or pro-hospital. Rather, this blog is “pro-holding CMS liable to render Rules that follow the law.” Whether the hospitals or the physicians were receiving a cut in reimbursement rates, I am in favor of the those cuts (and future cuts) abiding by the law. Interestingly, should the AHA win this case, it could set solid, helpful, legal precedent for all types of providers and all types of decreased Medicare/caid reimbursements going forward.

Because of the Site-Neutrality Rule, in 2019, hospitals’ reimbursements will drop approximately $380 million and $760 million in 2020, according to CMS.

Before CMS brags on a decrease in the Medicare budget due to a proposed or Final Rule, it should remember that there is budget neutrality requirement when it comes to Rules implemented by CMS. 42 US.C. § 1395l. Yet, here, for the Site-Neutrality Rule, according to articles and journals, CMS is boasting its Site-Neutrality Rule as saving millions upon millions of dollars for Medicare. Can we say “Budget Non-Neutrality?”

The American Hospital Association filed a lawsuit December 2018 claiming that CMS exceeded its authority by implementing the Final Rule for “site neutral” Medicare reimbursements for hospitals with outpatient facilities. The lawsuit requests an injunction to stop the decrease and an order to repay any funds withheld thus far.

The claim, which, I believe has merit, argues that the Site-Neutrality Rule exceeds CMS’s statutory authority under the Medicare Act because of the budget neutrality mandate, in part – there are other arguments, but, for the sake of this blog, I am concentrating on the budget neutrality requirement. In my humble opinion, the budget neutrality requirement is overlooked by many attorneys and providers when it comes to challenging cuts to Medicare or Medicaid reimbursement rates.

On March 22, 2019, CMS filed a Motion to Dismiss or in the alternative, a Cross Motion for Summary Judgment. On April 5, 2019, AHA (and the rest of the Plaintiffs) responded in opposition. On April 19, 2019, CMS responded to AHA’s response in opposition. The Judge has not ruled on the Motions, as of today, April 25, 2019.

Obviously, I will be keeping a close eye on the progress of this case going forward. In the meantime, more reductions in reimbursement rates are on the horizon…

Recently, CMS recently proposed three new rules that would further update the Medicare payment rates and quality reporting programs for hospices, skilled nursing facilities (SNFs), and inpatient psychiatric facilities.

Stay tuned.

The Future of Medicaid, a POPPED Balloon, and Proposals

There are more people on Medicaid than Medicare.

Think about that.  There are more people in America who qualify for Medicaid than Medicare.  Yet, as a nation, we spend more on Medicare than Medicaid.  (I assume because the older population requires more expensive services).  58 million people relied on Medicaid in 2012 as their insurance.

And Medicaid is growing.  There is no question that Medicaid is growing.  When I say Medicaid is growing, I mean the population dependent on Medicaid is growing, the demand for services covered is growing, and the amount of money required to satisfy the demand is growing.  This means that every year we will spend more and more on Medicaid.  Logically, at some point, at its current growth pattern, there will come a point at which we can no longer afford to sustain the Medicaid budget.

If you think of the Medicaid budget as a super, large balloon, imagine trying to inflate the balloon more and more.  At some point, the balloon cannot withstand the amount of air being put into it and it…POPS.

Will Medicaid eventually POP if we keep cramming more people into it, demanding more services, and demanding more money to pay for the increased services?

First, let’s look at the amount of money spent on Medicaid last year.

The Center for Medicare and Medicaid Services (CMS) just released the 2013 Actuarial Report on the Financial Outlook on Medicaid and its report considers the effect of Obamacare.

The CMS report found that total Medicaid outlays in 2012 were $431.9 billion.

The feds put in $250.5 billion or 58%.  States paid $181.4 billion or 42%.  In 2011, the federal government’s percentage of the whole Medicaid expenditure was 64%.

The CMS report also made future projections.

“We estimate that the [Affordable Care] Act will increase the number of Medicaid enrollees by about 18 million in 2022 and that Medicaid costs will grow significantly as a result of these changes starting in 2014.”

The 10 year projection, according to the report, is an increase in expenditures at an annual rate of 7.1%.  By 2022, the expenditures on Medicaid will be $853.6 billion.

Just for some perspective…a billion is a thousand million.

If you sat down to count from one to one billion, you would be counting for 95 years (go ahead…try it!).

If I gave you $1000 per day (not counting interest), how long would it take you to receive one billion dollars?  Answer: 2,737.85 years (2,737 years, 10 months, 7 days).  Now multiply 2,737.85 years by 853.6.

That’s a lot of years!!

In the next ten years, average enrollment is projected to reach 80.9 million in 2022.  It is estimated that, currently, 316 million people live in America.

So the question becomes, how can we reform, change, alter (whatever verb you want to use) Medicaid so that we can ensure that the future of Medicaid is not a POPPED balloon?  While I do not have the answer to this, I do have some ideas.

According to the CMS report, per enrollee spending for health goods and services was estimated to be $6,641 in 2012.  I find this number interesting because, theoretically, each enrollee could use $6,641 to purchase private insurance.

Remember my blog: “A Modest Proposal?” For that blog, I used the number $7777.78 per enrollee to purchase private insurance, which would require an increase in Medicaid spending assuming we give $7,777.78 to each enrollee.  But think of this…the amount would be a known amount.  Not a variable.

My health care, along with health care for my husband, costs $9,000/year.  My cost includes two people.  If I wanted individual insurance it would only have cost $228/month or $2,736/year.

What are other options to decrease the future Medicaid budgets and to avoid the big POP:

  • Decrease Medicaid reimbursements (really? Let’s make LESS providers accept Medicaid);
  • Decrease covered services (I would hope this idea is obviously stupid);
  • Decrease the number of recipients (I believe the ACA shot this one out of the water);
  • Create a hard cap on Medicaid spending and refuse to allow services over the cap regardless of the medical necessity (Again, I would hope this idea is obviously stupid);
  • Decrease administrative costs (this is apparently an impossible feat);
  • Create more difficult standards for medical necessity (I believe the ADA would have something to say about that); or
  • Print more money (Hmmmm…can we say inflation?).

Please, if anyone else has a good idea, let me, or, better yet, your General Assembly, know.

Because without question the future of Medicaid is larger and more expensive than today.  We want to avoid that…

POP!!

Study Shows the ACA Will Not Lead Physicians to REDUCE the Number of Medicaid Recipients, Supply and Demand, and Get Me My Pokemon Cards!

A recent “study” by Lippincott, Williams, and Wilkins is entitled “Doctors Likely to accept New Medicaid Patients as Coverage Expands.”  (I may or may not have belly laughed when I read that title).  See my blog “Medicaid Expansion: Bad for the Poor.”

The beginning of the article reads, “The upcoming expansion of Medicaid under the Affordable Care Act (ACA) won’t lead physicians to reduce the number of new Medicaid patients they accept, suggests a study in the November issue of Medical Care, published by Lippincott Williams & Wilkins, a part of Wolters Kluwer Health.”

The study was published October 16, 2013. (BTW: From what I can discern from the article, the title actually means that physicians will be forced to accept more Medicaid patients because there will not be additional physicians accepting Medicaid).  Odd title.

According to this study, the ACA will not cause doctors to reduce the number of Medicaid patients.  What does this study NOT say?  Nothing indicates that the ACA, which will allow millions more of Americans to become eligible for Medicaid, will cause MORE physicians to accept Medicaid.  Nor does the study state that the ACA will cause physicians to accept MORE Medicaid recipients.

Am I the only person who understands supply and demand?

Anyone remember the 1999 Toys.R.Us.com debacle? On-line shopping was just heating up.  I was in law school, and I, as well as millions of others, ordered Christmas presents on-line from Toys R Us.  I ordered a bunch of Pokemon trading cards for a nephew…remember those? Me either…I just bought them for my nephew.  Toys R Us promised delivery by December 10th. 

Toys R Us was, apparently, a very popular store that year, because Toys R Us is unable to package and ship orders in time to meet the December 10th deadline.  Nor could Toys R Us meet the deadline of Christmas.  Employees were working through the weekends.  About two days before Christmas, and just in time to create last-minute havoc during Christmas time, Toys R Us sends out thousands of emails saying, “We’re sorry.”

Obviously, Toys R Us was slammed by the media, and thousands of consumers were highly ticked off…including me.

I had to go to the mall (a place to which I detest going) on Christmas Eve (the worst day to shop of the entire year, except Black Friday, which I also avoid) to get my nephew a present.

Toys R Us learned its lesson.  It outsourced its shipping to Amazon.com, which, obviously, has the whole shipping thing down pat.

Hypothetical:

50 million people are currently eligible for (and receive) Medicaid services (these numbers are purely fictional, as I do not know the real numbers…I basically estimated 1 million per state, which, I am sure, is an underestimation).  Say there are 3.5 million physicians that accept Medicaid (70,000/state, which is probably a high estimation, when we are considering only physicians and not health care providers, generally). 

Our hypothetical yields 14.28 Medicaid recipients per physician.  Or a ratio of 14.28:1.

Media state that, if NC expanded Medicaid, that 587,000 more North Carolinians would be eligible for Medicaid if NC expanded Medicaid.

Using NC as a state average, 29.35 million more people would be eligible for Medicaid if all states expanded Medicaid (obviously not all states are expanding Medicaid, but, in my hypothetical, all states are expanding Medicaid).  This equals a total of 79.35 million people in America on Medicaid.

But….no additional physicians….

Because, remember, according to the Lippincott study, the upcoming expansion of Medicaid under the Affordable Care Act (ACA) won’t lead physicians to reduce the number of new Medicaid patients they accept.  But the ACA does not lead more physicians to accept Medicaid or physicians to accept more Medicaid patients.

This brings the ratio to 22.67:1.  8 1/2 new patients per one physican…and, BTW, that one physician may not be accepting new Medicaid patients or may not have the capacity to accept more Medicaid patients.  It’s a Toys R Us disaster!!!  No one is getting their Pokemon trading cards!!!

Why not? Why won’t the ACA lead more physicians to accept Medicaid?  Why won’t the ACA lead physicians to accept more Medicaid recipients?

Didn’t the ACA INCREASE Medicaid reimbursement rates?  Wouldn’t higher reimbursement rates lead more physicians to accept Medicaid and physicians to accept more Medicaid recipients???  I mean, didn’t you hear Obama tout that Medicaid rates would be increased to Medicare rates?  I know I did.

One average, Medicaid pays approximately 66% of Medicare reimbursement rates.  Obviously, every state differs as to the Medicaid reimbursement rate.

The ACA, however, slashes the Medicare budget by 716 million from 2013 to 2022.  The cuts are across-the-board changes in Medicare reimbursement formulas for a variety of Medicare providers, including hospitals, nursing homes, home health agencies, and hospice agencies.   Furthermore, the ACA creates the Independent Payment Advisory Board (IPAB), which is intended to determine additional Medicare reimbursement rate cuts. IPAB will be creating a new Medicare spending target; it will be comprised of 15 unelected bureaucrats.  The board will be able to make suggestions to Congress to reign in Medicare spending, and one of the biggest tools the IPAB has is cutting physician reimbursement rates.

It’s the old smoke and mirrors trick…We will raise Medicaid rates to Medicare rates…pssst, decrease the Medicare rate so we can meet our own promise!!

While I am extremely happy to hear that, at least according to the Lippincott study, the ACA will not lead physicians to reduce the number of Medicaid patients they accept, I am concerned that the ACA will not lead more physicians to accept Medicaid and physicians to accept more Medicaid recipients.

In fact, the study states that “[t]he data suggested that changes in Medicaid coverage did not significantly affect doctors’ acceptance of new Medicaid patients. “[P]hysicians who were already accepting (or not accepting) Medicaid patients before changes in Medicaid coverage rates continue to do so,” Drs Sabik and Gandhi write.  I bet the Drs. did not ask, “Would you continue to accept Medicaid, if you knew that your practice would endure more audits, post-payment reviews, possible prepayment reviews, and, in general, suspensions of reimbursements if anyone alleges Medicaid fraud, irrespective of the truth?”

Which tells me…hello…more Medicaid recipients, not more doctors!! Even if the physicians already accepting Medicaid COULD accept additional Medicaid recipient patients, each physician only has a certain amount of capacity.  To my knowledge, the ACA did not increase the number of hours in a day.  Supply and demand, people!!

Where are my Pokemon cards???!!!