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Insights and Trends

Headlines from the Hill: May Edition

Stay on top of the latest regulatory shifts and healthcare breaking news with Headlines from the Hill.

In this month’s edition you will find:

Affordable Care Act update: Final rule for benefit and payment parameters.

CMS recently issued a final rule governing the Benefit and Payment Parameters for Affordable Care Act (ACA) Exchanges for 2024. Multiple provisions in the final rule are intended to make coverage more accessible, expand behavioral health access, simplify choice, and make it easier for individuals to select a health plan in 2024.

For example, specific provisions strengthen network adequacy requirements, create a new special enrollment period (SEP) for those who lose Medicaid or Children’s Health Insurance Plan (CHIP) coverage, expand access to behavioral health care, and make it easier to select and enroll in health coverage.

CMS also finalizes a limit on the number of non-standardized plan options that can be offered to four options per product network type, metal level (excluding catastrophic plans), and inclusion of dental and/or vision benefit coverage, in any service area, for plan year 2024 and two options for plan year 2025 and subsequent plan years.

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CMS issues new hospital price transparency guidance.

Last month, CMS released an update on ‎hospital price transparency, stating they will impose stricter enforcement policies on hospitals that are out of compliance with ‎price transparency requirements. This includes:‎

  • CMS will now directly issue requests for a corrective action plan (CAP) to hospitals that ‎have not made any attempt to satisfy the requirements, rather than first issuing a warning ‎notice. Hospitals will still be required to submit their CAP within 45 days of CMS’s ‎request.‎
  • Hospitals are also required to be in full compliance with the price transparency ‎regulation within 90 days from when CMS issues the CAP request, rather than allowing ‎hospitals to propose a completion date for CMS approval. ‎
  • CMS will now automatically impose a Civil Monetary Penalty on hospitals that fail to ‎submit a CAP at the end of the 45-day deadline and/or those that fail to come into ‎compliance within 90 days of the initial CAP request. ‎

This action follows the House Energy and Commerce Health Subcommittee hearing, “Lowering ‎Unaffordable Costs: Legislative Solutions to Increase Transparency and Competition in Health ‎Care.” During the hearing, CMS Administrator Chiquita Brooks-LaSure testified on the ‎agency's strategy to reduce healthcare spending, including "aggressive" enforcement of hospital price ‎transparency rules.

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Hospital financial hurdles: Report highlights how these challenges have impacted health systems.

The AHA released a new report that details the extraordinary financial pressures continuing to affect hospitals and health systems, as well as access to patient care. The report found expenses across the board saw double-digit increases in 2022 compared to pre-pandemic levels, including for workforce, drugs, medical supplies and equipment, as well as other essential operational services like IT, sanitation, facilities management, and food and nutrition services.

These factors led to the most financially challenging year for hospitals and health systems since the beginning of the pandemic, leaving more than 50% of hospitals operating at a financial loss at the end of 2022, and with negative operating margins continuing into 2023. This puts access to vital services for patients and communities at risk. Among other findings, the report showed:

  • Overall hospital expenses have increased by 17.5% between 2019 and 2022. This far outpaced Medicare reimbursement, which only increased 7.5% during this same time.

  • Labor costs, which on average account for about half of hospitals’ total budget, have increased 20.8% between 2019 and 2022. This is in large part due to a greater reliance on contract staffing agencies to fill workforce gaps and to meet patient demand. The outcome of this has been a staggering 258% increase in total contract labor expenses for hospitals in 2022 compared to 2019.

  • For the first time in history, the median price of a new drug exceeded $200,000 — more than triple the median annual household income in the U.S. At the same time, price increases for existing drugs continue to outpace inflation, which helped drive a 19.7% increase in drug expenses per patient between 2019 and 2022. 

  • Hospital supply expenses per patient increased 18.5% between 2019 and 2022, outpacing increases in inflation by nearly 30%. Specifically, hospital expenses for emergency services supplies — which include ventilators, respirators and other critical equipment — experienced a nearly 33% increase during the same time period.

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Hospital IPPS Proposed Rule: Would increase Medicare rates by a net 2.8%.

CMS issued a proposed rule that would increase Medicare inpatient prospective payment system (IPPS) rates by a net 2.8% in fiscal year 2024, compared with FY 2023, for hospitals that are meaningful users of electronic health records and that submit quality measure data.

This 2.8% payment update reflects a hospital market basket increase of 3.0% as well as a productivity cut of 0.2%. It would increase hospital payments by $3.3 billion, minus a proposed $115 million decrease in disproportionate share hospital payments and proposed $460 million decrease in new medical technology payments. Thus, this proposed payment update comes as a concern following the near decades-high inflation and increased costs for labor, equipment, drugs and supplies.

Additionally, long-term care hospitals would see a staggering negative 2.5% payment update under this proposal. These insufficient adjustments are simply unsustainable. Hospitals are contending with rising labor costs combined with the growing challenges of a deepening caregiver shortage, drug price increases, and supply chain breakdowns, among other inflation challenges. All reasons why hospitals need more support from Medicare.

This IPPS proposed inflationary payment update fails to recognize today’s headwinds that will strain the health safety net in 2024, which will further threaten patients’ access to care as hospitals are forced to reduce services or in some cases, especially rural areas, close completely. Among other provisions, the proposed rule would:

  • Change graduate medical education payments for Rural Emergency Hospitals to better support graduate medical training in rural areas.
  • Continue the low wage index hospital policy for FY 2024 and treat rural reclassified hospitals as geographically rural for the purposes of calculating the wage index.
  • Clarify the data and information that is required under the physician self-referral law and reinstate program integrity restrictions removed in the 2021 outpatient prospective payment final rule for physician-owned hospitals meeting “high Medicaid facilities” requirements.
  • Seek public comments on approaches to support safety-net hospitals and the patients they serve.

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