November 6, 2017

House Tax Bill Cuts Not-for-Profit Hospital Executive Pay; Tax Exempt Bonds Would Be Curtailed

The House is moving tax cut and reform legislation that would impose a 20% excise tax on a tax-exempt organization that pays compensation. The 20% excise tax would be applied to any compensation paid to the organization’s “covered employees” (defined as the five highest paid employees) annually in excess of $1 million. An individual who becomes a covered employee for any taxable year beginning after December 31, 2016 would continue to be a covered employee in subsequent years.  The bill also makes other changes to compensation. Click here for more from Forbes.  Click here and go to Section 3803 of the tax bill.  Click here for a good Ways and Means Committee section-by-section summary.


The tax bill would also eliminate the ability of 501(c)(3) hospitals and health systems to issue tax-exempt bonds beginning January 1, 2018. The proposed legislation would also eliminate the ability of municipal issuers to advance-refunding bonds issued after January 1, 2018.  Click here for the AHA statement.  See Section 3601 through 3603 for the language on bond changes.  For a good summary of all the bill’s provisions, click here.


The House intends to pass the legislation by Thanksgiving – a tall order but doable.  The Senate is expected to release its tax bill this week and it is likely to be significantly different that the House bill.  Both chambers are working to get the legislation into law by year’s end.


CMS Final Rule Slashes 340B; Changes Made to Inpatient-Only List; Major Home Health Changes

As originally proposed, CMS is adopting a policy to reimburse hospitals for Part B drugs at a rate of average sales price minus 22.5 percent, a cut from the current reimbursement rate for Part B drugs to 340B hospitals of average sales price plus 6 percent. Rural Sole Community Hospitals, PPS-exempt Cancer Hospitals, and Children’s Hospitals are exempt from this policy for CY 2018. CMS states it may revisit these policies for CY 2019 and is especially interested in exploring policies addressing the needs of safety net hospitals.  Click here for a good summary with links from the SHC team.

  • The stocks of publicly traded home health companies soared last week after CMS tossed out a controversial new payment system that would have cut Medicare payments to home health providers by $1 billion in 2019. Click here.

HOPD Payment Rate and MIPS Changes in Two CMS Final Rules

CMS also finalized and published two other major rules: the Physician Fee Schedule and the Quality Payment Program (MACRA).  There are significant changes to both from the proposal earlier this year, including a change in the non-excepted HOPD payment rate and rating the cost performance category under MIPS at 10 percent next year when it had been proposed at zero.  Click here for a good SHC summary.


36% of Hospitals “Average” in Newest Leapfrog Patient Safety Scores

The Leapfrog Group has released its fall hospital safety grades, and more than a third earned only an average score on the report. The safety grades are released twice a year and assign letter grades from “A” to “F” to hospitals across the country. About a third of hospitals overall earned an “A” from Leapfrog: 832 of the 2,632 hospitals rated this fall. But many hospitals earned a “C” grade or lower. Leapfrog awarded 662 “B” grades, 964 “C” grades, 159 “D” grades and 15 “F” grades. Click here to find your hospital.

  • Oregon, Rhode Island, Hawaii, Wisconsin and Idaho showed the most improvement over the five-year period since the inception of the Hospital Safety Grade.  Click here for details.

House Votes To Extend CHIP, Community Health Clinics and Delay DSH Cuts

The House passed a bill, 242-174, on Friday to renew funding for the Children’s Health Insurance Program for five years, community health centers for two years, and other public health programs. The legislation (HR 3922) passed easily although many Democrats opposed the measure due to disagreements over the offsets. The bill also delays funding cuts to disproportionate share hospitals for two years. The offsets in the bill includes a $6.35 billion cut to the prevention fund over 10 years, increase of premiums for Medicare recipients making over $500,000 a year, and limits to Medicaid benefits for lottery winners. In addition, the bill would reduce the grace period for health exchange plans from 90 days to either 30 days or whatever a state chooses to set and change Medicaid third-party liability — which would bill an individual’s supplemental insurance before Medicaid, if applicable. The bill now goes to the Senate where their version is slightly different. Click here for committee fact sheet on the bill, and here for the bill language.


CMS Says Most Hospitals To Benefit from VBP Program in 2018

CMS is estimating the total amount available for value-based incentive payments for FY18 discharges will be approximately $1.9 billion and more hospitals will have an increase in their base operating MS-DRG payments than will have a decrease. In total, close to 1,600 hospitals will have a positive payment adjustment.  For FY18, about half of hospitals will see a small change in their base operating MS-DRG payments (between -0.5 and 0.5 percent). After taking into account the 2 percent withhold as required by law, the highest performing hospital in FY 2018 will receive a net increase in payments of slightly more than 3 percent, and the lowest performing hospital will incur a net reduction in payments of 1.65 percent. Click here for the list of all hospitals’ VBP results (see tables 16A and 16B).

MedPAC Wants Changes To Post-Acute Care Proposals

Congress directed the Medicare Payment Advisory Commission to research and develop a unified payment system for post-acute facilities including home health agencies, skilled nursing facilities, inpatient rehab facilities and long-term care hospitals as part of the IMPACT Act of 2014. Last week, the commission developed a stopgap measure to balance payments until Congress adopts its broader plan for a full overhaul. The proposal would phase in a new system increasing payments for medically complex patients while decreasing payments for care not associated with a patient’s condition. CMS would be directed to pay providers at a blend of rates – half based on the current rates and half on the proposed payments within each category of provider, instead of across provider categories. Commissioners will vote on the proposal in December. To view the proposal slides, click here.

  • Executive Director of MedPAC, Mark Miller, announced his departure at last week’s meeting to become vice president of health at the Laura and John Arnold Foundation, a public policy and philanthropy group. He’ll be replaced for now by deputy director Jim Mathews.  Miller served at MedPAC for 15 years.


Deaths by Drug Overdose Soar in U.S.: CDC

Deaths by drug overdose in the United States surged last year by more than 17 percent over 2015, another sign of the growing addiction crisis caused by opioids, according to a report released Friday by the CDC. Preliminary data from the 50 states show that from the fourth quarter of 2015, through the fourth quarter of 2016, the rate of fatal overdoses rose to nearly 20 people per 100,000 from 16.3 per 100,000. The CDC had previously estimated that about 64,000 people died from drug overdoses in 2016, with the highest rates reported in New Hampshire, Kentucky, West Virginia, Ohio and Rhode Island. Click here for the CDC report.  Click here for the NYTimes story.

  • CMS last week encouraged states to expand access to substance use treatment, saying the agency would be faster and more flexible in letting states use federal dollars in new ways. The announcement came as the President’s opioids commission released recommendations to address the drug abuse epidemic. Click here for CMS’ press release, and here for the Commission’s full report.

Heart Stents “Useless” for Thousands of Heart Patients: Study

A procedure used to relieve chest pain in hundreds of thousands of heart patients each year is useless for many of them, researchers reported last week. Their study focused on the insertion of stents, tiny wire cages, to open blocked arteries. The devices are lifesaving when used to open arteries in patients in the throes of a heart attack. Heart disease is still the leading killer of Americans — 790,000 people have heart attacks each year — and stenting is a mainstay treatment in virtually every hospital. More than 500,000 heart patients worldwide have stents inserted each year to relieve chest pain. Click here for details.


Two New Physician Payment Proposals Recommended To HHS

The Physician-Focused Payment Model Technical Advisory Committee (PTAC) sent comments and recommendations to HHS on two proposals for physician-focused payment models that were voted on at its September 2017 meeting. MACRA requires HHS to post a detailed response on the CMS website, but there is no required timeline for the Secretary’s response. The full Committee voted to make the following recommendations to the Secretary of HHS:

  • “HaH-Plus” (Hospital at Home Plus) Provider-Focused Payment Model, submitted by the Icahn School of Medicine at Mount Sinai: Recommend for implementation, click here for the model proposal and here for PTAC recommendation
  • Oncology Bundled Payment Program Using CNA-Guided Care, submitted by Hackensack Meridian Health and Cota, Inc.: Recommend for limited-scale testing, click here for the model proposal and here for PTAC recommendation.

Some CAHs Finding Ways To Prosper

Although rural hospitals have been facing shrinking Medicare margins and Medicaid funding threats, a number of rural hospitals have found ways to not only survive in this turbulent landscape, but prosper. Lexington Regional Medical Center, a Critical Access Hospital in Nebraska, went from a negative 2.8% total margin in 2010, to a positive 8% total margin in 2013 by adding new service lines.  They opened an urgent care center, which shifted 30% of patients who had been using the ER for non emergent cases, to the outpatient facility. Other hospitals have been successful in sharing costs, and increasing access to specialty services. To read more about how rural hospitals are finding ways to prosper click here.

  • The CAH Coalition works to find new revenue opportunities for CAHs. Learn more about the Coalition here.

President Signs Health Care Bill on Clinical Care

President Trump last week signed into law the National Clinical Care Commission Act (HR 920) that passed both the House and Senate unanimously. The bill will establish a national clinical care commission to evaluate and recommend solutions regarding better coordination and use of federal programs focused on improving care for people with metabolic syndromes and related autoimmune disorders. The Commission must submit an operating plan to HHS and Congress within 90 days of its first meeting. The commission is terminated after it submits a final report, but not later than the end of FY21. Click here for bill language and full summary.


House Votes to Repeal the Independent Payment Advisory Board

The House last week overwhelmingly approved a bill to repeal the ACA’s Independent Payment Advisory Board. The bill (H.R. 849), approved 307-111, is one of a few partial Obamacare repeal measures the House has taken up this year. The board has not yet gone into effect because Medicare spending levels haven’t risen high enough to trigger it. Democrats have long been skeptical of IPAB, arguing that it gives an outside board too much authority to cut Medicare spending in the future.The Senate has a few bills to also repeal IPAB, there is no indication they will vote on it this year. For bill language and summary, click here.


Despite New Law, EHRs Still Need Work A law designed to improve the use of electronic health records was enacted almost a year ago, but administration officials testifying in the Senate last week said there is still a long way to go before electronic health records are fully compatible throughout the health care system. Sen. Lamar Alexander (R-TN), chairman of the Health, Education, Labor and Pensions Committee, said that “the more we looked into these systems, the more we realized our nation’s system of electronic health care records was in a ditch.” Click here for Sen. Alexander’s press release, and here for the Committee hearing video and witness testimonies.


Diabetes Prevention Program Expanded in Final CMS Rule

As part of the physician fee schedule final rule issued by CMS last week, the agency finalized policies to implement the Medicare Diabetes Prevention Program (MDPP) expanded model starting in 2018. The MDPP expanded model will allow Medicare beneficiaries to access evidence-based diabetes prevention services, with the goal of a lower rate of progression to type 2 diabetes, improved health and reduced costs.  Click here for details about the MDPP.  The final rule can be accessed in the story above.


HHS Report Shows Higher Rates, Subsidies Before Open Enrollment Began Consumers on the federal health insurance exchanges will see fewer options in many states and higher sticker prices during the sign up period for the 2018 coverage year, a new report shows. The HHS report projects higher premium costs for plans sold on the exchanges, noting that the percentage of current enrollees with access to a plan for $200 or less decreased from 16 percent for the current plan year to 6 percent in plan year 2018. Even so, because of the increased subsidies, the report shows that 80 percent of enrollees can find plans for $75 or less for 2018. The report confirms what health policy experts have long warned: that uncertainty around the cost-sharing reduction payments required under the 2010 health care law would cause premiums to spike. Click here for the HHS report.

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