Week of 9/16/2013

HRI regulatory center weekly newsletter

This week’s regulatory and legislative news

Finalized Medicaid rule includes mandatory DSH cuts

Federal health officials last week released a final rule that calls for a $1.1 billion reduction in Medicaid disproportionate share hospital (DSH) payments over the next two years. Medicaid will adopt a formula for state-specific reductions that favor hospitals that treat a large number of uninsured patients or have high Medicaid volumes. The ACA calls for about $18 billion in cuts through 2020, the bulk of which run from fiscal year 2017 through 2020, when hospitals will lose $16.4 billion. For now, the Medicaid formula does not reflect a state’s decision to implement the ACA’s Medicaid expansion, but according to CMS officials, they may take that into account in 2016, with a separate rule.

HRI impact analysis: CMS plans to use data most DSH hospitals already report to help determine the amount of cuts for each state, but states still have flexibility when it comes to applying the reductions. The agency will take into account how much uncompensated care a hospital provides, as well as its Medicaid and uninsured volumes. It is important for hospitals to ensure they are categorizing patients correctly based on their ability to pay. The rule is weighted so that hospitals treating a significant portion of low-income patients will see the smallest percentage reduction in DSH payments. Additionally, health systems with a high degree of charity care should actively seek ways to help educate patients about their new coverage options under the ACA. Some lessons may be learned from the Massachusetts’ universal coverage experience, when hospitals’ indigent care funding was cut and replaced with mandated insurance coverage.

More than $114 million approved for comparative clinical effectiveness research

On Tuesday, the Patient-Centered Outcomes Research Institute (PCORI) awarded $114 million in grants to look at new ways to treat patients and compare treatments by examining the pros and cons of different options. The new money comes on top of the $189 million in grants since May 2012. The main focus of this round of funding is to examine the integrity and structure of research studies and to maintain the goal of providing quality comparative outcomes. Examples of newly funded research include efforts to improve data collection through electronic health records and social media, engagement of minority patients and caregivers, and research treatments for patients with rare diseases, when research can be traditionally difficult due to the small number of cases involved.

HRI impact analysis: As more money is released, a critical next step is to develop plans to disseminate and implement research findings. PCORI must make sure that the results of the studies are successfully shared and understood. As the health industry shifts to a more outcomes-based approach, changes in business models are inevitable. For example, in the pharmaceutical industry, a product’s success used to hinge on measures such as FDA approval, a clinician’s preference, and safety. Now, the focus is shifting to how the drug performs in the real world and the quality of life of patients.

Medicare advisory panel contemplates changes to ACOs

Mixed Medicare ACO financial results are starting to emerge, and experts are already considering what improvements need to be made. The Medicare Payment Advisory Commission (MedPAC) met last week to assess the program, which was included as part of the ACA to help control costs. One concern is the gap between costs to operate an ACO compared to the savings produced. Some pioneer ACOs, which are a part of a Medicare program that provides bonuses and penalties to participating organizations, reported increased costs of 1% to 2%. Some participants were only able to achieve 0.5% of savings, which may have caused some to drop out of the program earlier this year. Another top concern is how to discourage patients from seeking care outside of an ACO provider network, which can make it difficult to manage care, improve patient outcomes, and meet cost-saving targets.

HRI impact analysis:
One idea floated to help keep patients in-network was a supplemental insurance policy, or Medigap plan, that would be tied to an ACO. The idea could be a winning scenario for patients, providers, and the government. Medicare beneficiaries who choose to sign up for the supplemental gap coverage would enjoy lower co-payments as an incentive for choosing doctors that are also in the ACO network. That may help providers trying to coordinate their care and may ultimately lower Medicare spending. As health delivery systems and payment models take shape, new insurance products such as ACO Medigap policies may emerge. 

US Census report shows minor drop in uninsured young adults

A US Census report released Tuesday revealed that the percentage of people without health insurance dropped slightly, from 15.7% to 15.3% between 2011 and 2012. For young adults aged 19 to 25, the drop in the uninsured rate—from 27.7% to 27.2%—was similarly modest. 

HRI impact analysis: Although the young adult uninsured rate dropped only slightly from 2011 to 2012, it reflects a broader decline of 4 percentage points since 2009—the first year of ACA implementation. Under the ACA, young adults up to age 26 are allowed to stay on their parents’ insurance plans. The new Census numbers suggest that most eligible young adults have already signed onto their parents plans—meaning that the remaining 27% may be well positioned to buy coverage on the state exchanges.

Health systems slow to seek out, educate newly insured

Despite having financial incentives to do so, the nation’s hospitals may not fully be prepared to capture a share of the nearly 16 million people who are expected to gain new health benefits next year. That means some hospitals may not recoup all of the new money available via subsidized coverage on new state exchanges. To learn more about how health systems are preparing for the opening of the new marketplaces, read HRI’s Health exchanges: Open for business.

New PwC insight on ACA employer regulations

PwC offers insights on recent ACA rules impacting employers in its HRS Insights publication. These new IRS rules provide guidance on “notice of coverage options” to employees.

Upcoming events & deadlines

  • September 22-26 – Annual America’s Health Insurance Plans (AHIP) Medicare, Medicaid, and Dual Eligibles 2013 Programs conference.
  • September 23 - Deadline for compliance with HIPAA’s new updated rules, including modified policies and procedures for business associates and patient information protection documentation
  • October 1 – Health insurance exchange open enrollment begins
  • October 1 – CMS final rule on state Medicaid disproportionate share hospital payment reductions
  • October 17-18 – Annual America’s Health Insurance Plans (AHIP) States Issues conference on health insurance exchanges and Medicaid expansion

Quote of the week

“We expect pressure on the high-priced, academic hospitals in the market to reconsider pricing as narrow networks continue to exclude them,” said Jenny Kerr, Market Analyst at HealthLeaders-InterStudy. “Employers are sending a message that they are no longer willing to pay for hospitals that charge higher rates for routine services to cover costs of their teaching and research missions.” To learn more about how academic medical centers can be affected by narrow networks, read HRI’s: The future of academic medical centers.

In the news

A recent article in the Washington Post takes a look at who will be left without coverage under the Affordable Care Act and highlights why free clinics are still a needed resource.

Factually correct

32% – the percentage of HRI surveyed health systems that have educated their hospital financial counselors on insurance enrollment options in the health insurance exchanges.

Return to HRI regulatory center landing page