Just before the elections, the Centers for Medicare and Medicaid Services (CMS) released a final rule extending changes to their 340B drug reimbursement policy to include hospital outpatient departments. CMS also expanded the application of site-neutral payment policies, addressing a flaw where the government would pay hospitals far more money to perform the same services as non-hospital providers, leading to all the bad incentives one might expect.
The rule changes, though expected, were not warmly welcomed by the hospital industry. The American Hospital Association (AHA), already embroiled in a legal dispute over the 340B payment cuts, is also ready to challenge the site-neutral payments, which the group argues will hurt them and their patients, about which they are halfway correct.
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Site-neutral payments are a good thing in and of themselves. The last thing the healthcare industry needs is more profit-driven provider consolidation. By restoring everyone to an equal footing, doctors and other clinicians will be able to make choices about the types of practices they want to run, without needing to “go in-house” to make a living.
Other physician groups have been quick to recognize this fact. The American Association of Family Physicians, the American College of Physicians, and the Partnership to Empower Physician-Led Care all recently lauded the changes, heralding the CMS’ move as a victory for consumers and physicians alike.
There is a certain irony in the idea that a rule that refuses to play favorites with delivery site could be construed as an instance of administrative overreach. Yet to hear the AHA tell it, this is exactly what occurred with the passage of site-neutral payments. The AHA alarmingly adds that the policy changes would disproportionately harm small rural hospitals, which have indeed been shuttering their doors at increasingly rapid rates in recent years.
If the AHA were truly worried about rural hospital centers, one wonders what’s taken them so long to do anything about them. Rural hospitals’ financial hardship is a devastating problem with real consequences, but past closures are in no way related to a policy that won’t take effect until next year.
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Importantly, the AHA does not represent the views of all its members. We have worked with delivery organizations that realized years ago that the old financial models were eventually going to crumble under their own contradictions. These leading organizations have invested both time and money in developing new models focused on patient outcomes and financial approaches like bundled payments reflecting transparency in cost and quality.
AHA’s jabs against the anticipated 340B spending cuts are even more feeble. These are projected to help “lower out-of-pocket costs for beneficiaries and save Medicare as much as $380 million in 2019.” It is truly astonishing that so many within the industry choose to exhaust their dwindling resources and waning energy by resisting market-based change, rather than using these changes to revitalize their practices, build bridges with new entrants in healthcare and accelerate uptake of value-based care models.
Victory for America’s hospitals won’t come from a successful lawsuit. That’s just a delaying tactic. As the healthcare industry continues to suck up an even greater share of the economy and tax dollars, voters will continue to clamor for change.
What’s more (and worst of all), a fleeting victory from the bench might cause hospitals to feel falsely vindicated in continuing toxic business practices. This artificial sense of security would further stagnate the industry’s push toward value, usher in more mergers, lead to more closures, and increasingly cause these institutions — which remain a vital resource to consumers in communities around the nation — to collapse.
Instead, hospitals will be much better served if they look to reinvent themselves proactively, rather than wait for more external catalysts — whether in business or government — to disrupt them by force. Delaying the inevitable only undermines the opportunities hospitals currently have for profitable, self-induced disruption.
Site-neutral payments are a chance for these organizations to hit the ‘reset’ button on their business models and actively redefine their role amid a shifting healthcare landscape. All the time, money and energy required to resolve these issues in court will further deplete these hospitals — and the taxpayer-funded CMS — of resources that could be better spent delivering value to consumers.
Photo: atibodyphoto/ Getty Images
Rita Numerof, PhD, President of Numerof & Associates, is an internationally recognized consultant and author with over 30 years of experience in the field of strategy development and execution, business model design, and market analysis. Her work across the global healthcare spectrum gives her a unique perspective on the challenges of pharmaceutical and medical device manufacturers, healthcare delivery institutions, payers, physicians, and suppliers. She has authored six books, including Bringing Value to Healthcare: Practical Steps for Getting to a Market-Based Model, and is a regular contributor to Forbes, where she writes about the business of healthcare and the need to move to a market-based model.
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