News Briefs: Hospital advocates bemoan the small Medicare payment increase proposed for FY25
The payment update described in Medicare’s FY25 proposed rule for inpatient hospital care and long-term care hospitals falls well short of what hospitals need to keep up with costs, advocates say.
The inpatient payment rate would rise by 2.6% for hospitals that fulfill quality-reporting requirements and meet the criteria to be designated as meaningful users of electronic health records. A 3% increase in the market basket would be reduced by 0.4% via a statutory cut known as the productivity adjustment.
Industry stakeholders argued that amid reports of steadily increasing expenses over the past year, especially for supplies and drugs, hospitals could use a more generous update. Advocates such as the American Hospital Association and the Federation of American Hospitals warned that operational sustainability for some hospitals could be at risk.
One welcome change for hospitals, relative to the FY24 rule, is that uncompensated care (UC) payments to Medicare disproportionate share hospitals are initially projected to increase by $568 million. In this year’s final rule, UC payments fell by roughly $950 million as a result of estimated changes to the uninsured rate.
UHG has been extorted for more ransom money related to Change Healthcare
A ransomware group in April began leaking protected health information (PHI) obtained through the Change Healthcare cyberattack, according to recent reports.
A group known as RansomHub posted PHI on the dark web, several tech media outlets reported. RansomHub sought a payment after the Blackcat group, which was described as the perpetrator of the attack, reportedly cut its own partners out of a previously paid $22 million ransom. UnitedHealth Group (UHG), parent company of Change Healthcare, confirmed a ransom payment was made.
On April 9, RansomHub said it had four terabytes of data from the hack. The group threatened to publish or sell the full set if no additional ransom
was paid.
The files include “personal information about patients across different documents, including billing files, insurance records and medical information,” TechCrunch reported after examining a sample.
Organizational information may also be at risk. The files include contracts and agreements between Change Healthcare and its partners, according to the report.
The Medicaid unwinding continues to pose issues one year in, but healthcare coverage appears stable
Since April 1, 2023, when states could begin disenrolling Medicaid beneficiaries as the COVID-19 public health emergency neared an end, more than 20.3 million beneficiaries had their coverage terminated as of April 19, 2024, according to the Kaiser Family Foundation’s (KFF’s) tracker.
The total is likely to surge higher still, with millions more renewals remaining to be determined.
Yet according to the most recent available federal data, the uninsured rate was 7.7% in Q3 2023. That’s the same as in Q1, the final quarter before the unwinding began. One factor in stabilizing insured rates in upcoming quarters will be the record 21.3 million enrollees who signed up this year for Affordable Care Act marketplace plans.
Analysts also foresee potential growth in group coverage because some people with access to employer-sponsored insurance may have found more affordable choices in Medicaid during continuous enrollment.
Newer data indicate reason for concern about coverage rates, however. KFF released survey results showing 23% of disenrolled beneficiaries remained without insurance in February and March. That would equate to about 4.6 million people based on the latest numbers.
The FY24 HHS budget funds key programs for rural hospitals while tightening spending as well
The recently passed budget covering HHS during the remainder of FY24 contains notable provisions for healthcare providers.
The roughly $117 billion departmental budget for the final six months of the fiscal year was set in an appropriations bill that was passed by Congress and signed by President Joe Biden within hours of the March 22 expiration of funding for many federal departments.
Contained in the legislation is $64.3 million for the Health Resources and Services Administration’s rural hospital grant program, including $20.9 million for grants helping small rural hospitals with quality improvement and health IT adoption and $5 million to provide technical assistance for rural emergency hospitals.
There is also $4 million for the Rural Hospital Stabilization Pilot Program, a newly formed grant program designed to bolster rural hospitals in expanding services to meet the needs of their communities. The program received $16 million less than requested.
Many public-health programs of the CDC and the Substance Abuse and Mental Health Services Administration (SAMHSA) also received substantially lower allocations than proponents and the White House had sought.
Within SAMHSA, for example, funding for substance abuse treatment programs is rising by $2 million, or nearly $180 million less than the request. Mental-health program funding is increasing by $77 million, but that’s more than $700 million under the requested amount. Funding for state opioid response grants was kept flat after a request for $425 million more.
Hospital finances are on the upswing, but the toll of the Change Healthcare outage is yet to be seen
There is reason to be optimistic about the state of hospital finances, but the ongoing impact of the Change Healthcare cyberattack has added uncertainty to the forecasts.
Financial metrics for the first two months of 2024 continued to show a steady recovery from pandemic-era doldrums, especially those that were evident in 2022 and early 2023. As recently reported by Syntellis (part of Strata Decision Technology), the year-to-date median hospital margin through February was 6.4%.
Year-over-year, the jump in operating margin was 4.8 percentage points, while median operating EBITDA margin rose by 4.1 points.
Cash-flow issues are likely to arise from the Change Healthcare outage, which was still progressing toward a full resolution in mid-April.
“I’m not sure if [the outage] would change your operating margin because you could probably still take revenue for the volume, but if you’re not getting paid, then your cash is going to be depressed,” said Steve Wasson, chief data and intelligence officer with Strata Decision Technology.
In a mid-March analysis of for-profit healthcare entities, Fitch Ratings posted that the incident “could negatively affect the credit profiles of smaller healthcare providers, pharmacies and other companies that rely on Change for working-capital-related services.”
Insurers see reasons for concern as CMS keeps the 2025 MA purse strings tight
Medicare Advantage (MA) faces the prospect of constrained revenue and payments for participating stakeholders after CMS finalized what amounts to a small decrease in the 2025 payment rate.
Average revenue for MA plans is projected to increase by 3.7%, or more than $16 billion — but that’s primarily because of a projected increase in the risk-score trend. Base payments to plans from Medicare are set to drop by 0.16%.
The key numbers remained unchanged from the advance rate notice that was published earlier this year. Stakeholders, especially insurers, had submitted comments seeking a more positive adjustment in the final notice.
Providers stand to be affected. Jerry Penso, MD, MBA, president and CEO of the American Medical Group Association, said the update amounts to “yet another round of payment reductions” for providers.
“I’m concerned plans will reduce their benefit packages to account for this cut, which will be detrimental to patients and providers,” Penso said in a written statement.
CMS calls for hospitals to be subject to a new bundled payment model
A notable policy in Medicare’s recently proposed FY25 rule for inpatient hospital care and long-term care hospitals is the formation of a mandatory bundled payment model.
The Transforming Episode Accountability Model, or TEAM, would be obligatory for hospitals in yet-to-be-determined markets beginning in 2026.
Participants would coordinate care for Medicare beneficiaries during and for 30 days following five types of procedures: lower-extremity joint replacement, surgical hip or femur fracture treatment, spinal fusion, coronary artery bypass graft and major bowel procedures.
The procedures were selected in part because they have sufficient volume to warrant establishing standard care pathways during the acute and post-acute portions of the episode, CMS wrote in the proposed rule.
As in earlier bundled payment models, including two long-running models that will wrap up at the end of 2024 and 2025, hospitals would receive a risk-adjusted target price prior to the performance year to cover all costs associated with episodes of care.
There also would be a quality adjustment based on measures of readmissions, patient safety and patient-reported outcomes.
MedPAC suggests a more precise way to target DSH and UC payments
In its March 2024 semiannual report to Congress, the Medicare Payment Advisory Commission (MedPAC) included a recommendation for a new approach to Medicare disproportionate share hospital (DSH) and uncompensated care (UC) payments.
Congress should authorize implementation of a Medicare Safety-Net Index (MSNI), which would be more accurately based on a hospital’s share of low-income Medicare beneficiaries, MedPAC said.
A hospital’s MSNI percentage would be an add-on to its Medicare fee-for-service payment rate and also would apply to Medicare Advantage payments. Components in the formula would include a hospital’s share of:
- Patients who receive the Part D low-income subsidy
- Revenue spent on bad debt and charity care
- Overall volume associated with Medicare beneficiaries
The FY24 budget contains accommodations for vulnerable hospitals
Legislation passed in March to fund federal agencies for the rest of FY24 includes guidance and directives from Congress to HHS and CMS in support of smaller and rural hospitals.
For example, CMS is instructed to extend the low-wage-index hospital policy, which boosts payments for hospitals in the 25th percentile or lower of the Medicare wage index. The policy was implemented in FY20 and already was in place through FY24. Congress sought a continued extension to ensure the collection of sufficient data for CMS to evaluate the policy.
In the recently proposed rule for FY25 Medicare inpatient payments, CMS said it plans to maintain the policy through FY27.
CMS is also charged with supporting hospitals that lose eligibility for the sole community hospital (SCH) designation based on distance and market-share criteria. Such hospitals should be granted a reasonable transition period away from SCH status, Congress said.
Several dozen hospitals and health systems received funding — generally in the six or seven figures for outlays such as facilities, equipment and workforce training — as part of earmarks included by individual senators or representatives.
UHG details the early cost and revenue impact of the Change Healthcare cyberattack
The Feb. 21 cyberattack on Change Healthcare had approximately an
$870 million impact on parent company UnitedHealth Group (UHG) through March, leaders said April 16 during an investor call to discuss Q1 financials.
Even so, UHG’s overall performance and revenues have been “growing and performing at a level which allows us to maintain the adjusted-earnings-per-share objectives we established last November, even while taking on the business disruption impacts,” said
John Rex, president and CFO.
About $595 million in loss stemmed from direct costs applied to clearinghouse restoration and from medical expenses related to the suspension of some care management activities, Rex said. Meanwhile, revenue loss amounted to $280 million.
“The effect of the attack in the period is one of keeping all the lights brightly burning at full readiness to resume services while revenue production was essentially suspended,” Rex said.
For the full year, direct costs are projected at between $1 billion and $1.15 billion and revenue loss at between $350 million and $450 million, depending on how restoration proceeds.
Hospital data-reporting obligations should continue in the post-pandemic era, CMS says
Medicare’s FY25 proposed rule for inpatient hospital care includes a requirement for hospitals to continue reporting data on respiratory disease prevalence after pandemic-era reporting mandates expired in April.
Beginning Oct. 1, hospitals would need to report data pertaining to COVID-19, influenza and respiratory syncytial virus (RSV). Reporting would be required weekly and include:
- Confirmed infections among hospitalized patients
- Hospital bed census and capacity
- Limited patient demographic information, including age
“The moderate COVID-19 burden coinciding with resurgent influenza and RSV has led to an overall hospitalization burden larger than observed during severe influenza and RSV seasons prior to the COVID-19 pandemic, placing patient health and safety at risk,” CMS wrote. “The result of this ‘new normal’ will be more burdensome respiratory virus seasons for the foreseeable future, which promises to place continued strain on the nation’s hospitals.”
The rule also states, “Sustained data collection and reporting outside of emergencies would help ensure that hospitals and [critical access hospitals] maintain a functional reporting capacity that can be mobilized quickly when a new threat emerges to inform and direct response efforts that protect patients and their communities.”
CMS seeks feedback on the proposal.
