News Briefs: Hospital advocates say Medicare’s 2025 outpatient payment update should have been higher

Medicare payments to hospitals for outpatient services will rise by 2.9% in 2025, according to a final rule published Nov. 1. The update is derived from a 3.4% increase in the market basket and a reduction of 0.5 percentage points as required based on the economywide productivity adjustment. Any hospital that does not fulfill quality-reporting requirements will face a reduction of 2 percentage points to its update.

Prior regulations established that ambulatory surgical centers receive the same annual update as hospitals through at least 2025.

In the final rule, CMS acknowledged the concerns of stakeholders who commented that a roughly 3% update is inadequate to keep up with inflation (e.g., a 6.1% increase in costs of hospital services in July).

Some of those commenters said CMS should adopt a Medicare Payment Advisory Commission recommendation to add 1.5 percentage points to the payment update generated for 2025 under the standard methodology.

As it has in past years, CMS said the Medicare statute constrains the agency’s ability to take action on the payment rate beyond the market-basket increase and specified adjustments.

Physicians face Medicare payment cut, plead for help from Congress

Whereas hospitals will reap a small increase in their Medicare payment rate, physicians are counting on Congress to avert or at least soften a looming cut for 2025. That has happened at the end of each year since 2020.

For now, the conversion factor is set to drop by 2.83%. Due to RVU changes, the projected impact on specialties ranges from increases of 4% for clinical social workers, 3% for clinical psychologists and 2% for anesthesiologists to 2% declines for diagnostic testing facilities, ophthalmology and vascular surgery.

Physician advocacy groups such as the American Medical Association (AMA) have noted that the Medicare Economic Index projects a 3.5% cost increase for 2025. When adjusted for practice-cost inflation, payments have fallen by 29% since 2001.

“You don’t have to be an economist to know that is an unsustainable trend, though one that has been going on for decades,” Bruce Scott, MD, president of the AMA, said in a written statement.

“For physician practices operating on small margins already, this means it is harder to acquire new equipment, harder to retain staff, harder to take on new Medicare patients.”

MA health plans appear to be skirting the 2-midnight rule

As hospitals struggle with payer tactics involving denials, a new analysis quantifies the extent to which Medicare Advantage (MA) health plans still avoid paying for inpatient care.

An October report by Kodiak Solutions examined claims data from more than 1,900 hospitals and found that MA plans categorized hospital visits as outpatient observation stays at a rate more than three times as high as traditional Medicare during a year-long period ending in June.

Observation stays among MA beneficiaries did decrease by roughly 4 percentage points between the final six months of 2023 and the first half of 2024. That shift followed CMS guidance for 2024 reiterating that the two-midnight rule and other utilization management criteria should apply to MA in the same manner as in traditional Medicare.

But the 2024 rate, ranging from 14.4% to 16.3% per month through June, was still notably higher than that of traditional Medicare, where the share was between 3.7% and 5.4% per month.

2 drug companies go to court seeking authorization to turn 340B into a cash-back rebate program

After the Health Resources and Services Administration (HRSA) sided with providers and blocked an attempt by Johnson & Johnson (J&J) to offer discounts to hospital participants in the 340B Drug Pricing Program only in the form of rebates, the drug manufacturer took the issue to court.

A lawsuit filed Nov. 12 in Washington, D.C., federal district court says J&J has the right to establish the rebate model, which the manufacturer maintains is necessary to verify whether the drugs are actually purchased and dispensed by the hospital. The model would apply to the frequently used drugs Stelara and Xarelto, and J&J said cash payments “typically” would be made within 10 days following “timely submission” of claims.

A bipartisan group of 189 members of the House of Representatives communicated their feelings to HHS and HRSA in late September, saying the proposed model constitutes “an unapproved and unlawful change” and “would have severe consequences for our nation’s safety net providers and the patients they serve.”

On Nov. 14, Eli Lilly filed a similar lawsuit, looking to implement a “cash replenishment model” that apparently would cover all Medicare Part B drugs.

Supply chain challenges mount for hospitals amid extensive damage to a key manufacturer

The supply chain for hospitals and other healthcare providers took a hit from the intense destruction wrought by Hurricane Helene in late September.

In its relentless sweep across the southeastern United States, the storm severely disrupted operations at Baxter International’s Marion, N.C., facility, the nation’s largest manufacturing site for IV and peritoneal dialysis solutions. About 60% of large-volume IV fluids distributed domestically are produced at the plant, according to Baxter.

The company announced Sept. 29 that it had to temporarily halt production at the location because of flooding that stemmed from a levee breach, along with a bridge collapse that blocked travel on the road leading to the facility.

Allocations of Baxter’s highest-demand IV fluids were reduced to 40% for direct customers and 10% for distributors in the immediate aftermath of the storm.

Both shares were raised to 60% by Oct. 9 and remained there when this issue went to press in late November, forcing hospitals to take conservation measures such as rationing.

In a Nov. 11 update, Baxter said it hoped to progress to full allocations for all customers by year’s end.

New appeals processes for Medicare patients are set to begin in 2025

Hospitals should prepare to imminently accommodate new appeals processes and paperwork for some Medicare patients whose status gets changed from inpatient to outpatient observation during a stay.

A final rule published Oct. 15 gives beneficiaries options for appealing such a change. The new processes, mandated by a 2020 court ruling, are scheduled to take effect by mid-February and do not apply to Medicare Advantage.

The appeals processes after status reclassification will be available to beneficiaries who either were not enrolled in Part B or were at the hospital for at least three days but designated as an inpatient for fewer than three days and admitted to a skilled nursing facility within 30 days of their hospital stay.

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