Site-Neutral Proponents Float Rural Exemption As Hospitals Flag Risks

Inside Health Policy

February 15, 2024 4:18 pm


New talk about potentially ameliorating the hit to rural hospitals by adding rural exemptions to controversial site-neutral hospital policies is adding a wrinkle to the ongoing negotiations process. The hospital lobby is continuing its stern opposition to all site-neutral provisions, but some experts said the reforms are proving popular among voters, especially if an exception for rural hospitals is worked into the current provisions. Rural health lobbyists said they’d support such a tweak.

Stakeholders and congressional staffers remain unclear about the status and structure of hospital reform provisions that might be included in a bicameral health package as the countdown to Congress’ March 8 continuing resolution continues. The savings from hospital site-neutral provisions are entwined with a set of other extenders, including a so-called doc fix and a delay to the Medicaid Disproportionate Share Hospital cuts — and the ongoing lack of clarity about site-neutral complicates stakeholders’ lobbying for finite payment offsets elsewhere.

Mark Miller, executive vice president of health care at Arnold Ventures and former executive director of the Medicare Payment Advisory Commission, told Inside Health Policy hospitals aren’t likely to back site-neutral exemptions for rural hospitals even though they’ve raised concerns about how the reforms could harm rural hospitals’ payments.

“If the [American Hospital Association] and the Congress — and we have said this in our discussions with Congress — if you’re concerned about rural hospitals, exempt them. And this is the direct statement I would say to AHA: If you really care about rural hospitals, then exempt them from the policy. But they’re not going to do that,” Miller said. “They want to argue that they’re protecting rural hospitals, but if they just took a position and said, ‘exempt them from the policy,’ that’s protecting them, so why don’t they say that?”

Miller criticized several elements of the ongoing hospital lobbying to keep site-neutral provisions out of any compromise legislation, including a recent letter from the American Hospital Association urging Congress to nix site-neutral reforms and stave off cuts to Disproportionate Share (DSH) hospitals.

“They just kind of smear all of it together, and they say ‘you’re cutting the hospitals’ — But of course, what’s being affected . . . is the off-campus purchased stuff, which is usually a physician office,” Miller said. “We would say this is rolling back price increases imposed on the beneficiary and the taxpayer who went to their physician office. That’s where we think the money is coming from, and, we would argue, is an unethical price increase.”

Miller says prices go up as much as 300% when a hospital acquires a physician practice and argues the reduction in payment to off-campus outpatient payments is just bringing costs back to where they were before they were acquired. AHA’s letter “clouds the issue” by framing the provisions as cuts to hospitals, he added.

“All they’re doing is hiding behind the rural hospitals — the rural hospitals aren’t doing this much,” Miller said. “This is being executed by the large hospital systems who’ve bought beds and are now [doing] horizontal consolidation and are now engaged in vertical integration or consolidation by buying physician practices.”

Alexa McKinley, director of government affairs and policy for the National Rural Health Association, said NRHA generally doesn’t support site-neutral reforms because of the distinct impact they’ll have on rural hospitals compared to urban and suburban hospitals.

The volume of patients at rural off-campus provider-based departments are often the only point of access to care in some communities and are more convenient or closer than going to a hospital, which is why they’re often high volume and thus able to stay afloat, albeit on thin margins, McKinley said.

If rural off-campus departments are paid less because of the reforms, it’d ultimately threaten rural providers’ ability to keep their doors open, which would threaten access to care for rural patients by extension.

But if site-neutral reforms do move forward, NRHA would support a carve-out for all rural hospitals, McKinley said. NRHA has also called on CMS to consider exempting rural hospitals with less than 100 beds, Medicare-dependent hospitals, low-volume hospitals, and rural referral centers from current site neutral caps in the same way that sole community hospitals are exempt.

Miller took a similar approach.

“We don’t think all hospitals are well off. We think there ‘have’ hospitals and ‘have not’ hospitals. And this kind of opaque cross-subsidization where they’re hitting the beneficiary and the taxpayer is not the way we should solve that problem,” Miller said. “That problem should be out in the open — we should identify the dollars and direct the dollars to the hospitals that need them.”

When asked whether AHA would support language exempting rural hospitals from any site-neutral provisions, Jason Kleinman, director of federal relations at AHA, raised ongoing concerns for the stability of rural hospitals.

“Rural hospitals are experiencing unprecedented challenges right now that have forced 148 rural hospitals to close or convert to another type of provider since 2010,” Kleinman said in an email. “Temporarily not cutting these hospitals is not a solution to addressing these problems. In fact, it’s a gimmick and still puts access to care at risk.”

Instead, Kleinman said AHA’s looking to work with Congress on its rural hospital advocacy agenda which focuses on improving accountability for commercial insurers’ reimbursements to hospitals, improving flexible payment options, beefing up the workforce and protecting the 340B program.

AHA previously raised concerns that the rural hospitals facing impacts from the Lower Costs, More Transparency Act would face $272 million in cuts over a decade. Those same hospitals already experience a -16.4% Medicare outpatient margin and a -12.1% overall Medicare margin, AHA said in a Feb. 7 memo, meaning site-neutral reforms could drive them even further into the red.

But Miller pointed to research conducted by the Actuarial Research Corporation indicating around 2% of off-campus spending could be affected by site-neutral provisions and added that AHA’s math comes to less than 1% of total savings that’d come from implementing the provisions — dollars that could then be reinvested in the system.

For starters, Congress could take the savings from site-neutral reforms and put it toward rate hikes for rural hospitals, Miller said, either through the current payment system or using a supplemental set of payments to safety net hospitals. Miller also pointed to MedPAC’s recent work on reorganizing disproportionate share and charity care hospital payments as a means of improving support for vulnerable hospitals.

“I think their fundamental argument is, ‘We’re just trying to get money from anywhere, and we’re doing the right thing.’ And I think our fundamental argument is, ‘If we want the right thing — supporting vulnerable, rural, safety net hospitals, — this should all be transparent,” Miller said. “Where’s the money coming from? Who’s it going to?”

If site-neutral policies aren’t included in a future package, it leaves lots up in the air, namely a set of health extenders that need to be paid for — including DSH cut delays. But Kleinman shut down the idea of using site-neutral payfors for other programs, citing the harm it would do to Medicare beneficiaries.

“The AHA opposes the site-neutral cuts in the legislation and we don’t support permanent hospital Medicare cuts to be used for other programs. Congress has long opposed cutting Medicare and seniors’ access to care to pay for other non-Medicare spending,” Kleinman said in an email. “Gimmicks that temporarily carve out groups are just that, gimmicks. We remain opposed to the cuts as they will lower quality of care and access to hospital-based care, period.”

But around three-quarters of voters support limiting facility fees and about eight in 10 voters support requiring providers to disclose facility fees up front to patients, according to a December poll from the United States of Care conducted in partnership with Morning Consult. That’s around 70% of Republicans polled and 79% of Democrats polled, the polling data say.

Over 75% of those polled, including 73% of Republicans and 78% of Democrats, would support banning facility fees for services conducted in off-campus facilities, according to the poll.

Lisa Hunter, senior director for policy and external affairs at USofCare, pointed out most of the impact of those reforms would fall on larger, corporate hospitals.

“Our ideal is for site-neutral payments to prevail without exemptions so that policymakers can target those savings and reinvest them in the rural health infrastructure. Still, if rural hospitals need to be exempt to make progress on this issue, we understand,” Hunter said in an email. “We know from our listening research that people in rural communities overwhelmingly support transparency and fair billing provisions.”