Senate bill would give hospitals a big break from looming Medicaid disproportionate share hospital cuts (updated)

By Nick Hut / November 13, 2023

Nov. 15 update: On Nov. 14, the House passed legislation on a bipartisan basis to keep the government funded through Jan. 19. Medicaid disproportionate share hospital payments would be guaranteed to remain at their full amount through that date, and the bill similarly maintains short-term funding for graduate medical education, community health centers and the National Health Service Corps. The bill moved on to the Senate and was considered likely to pass that chamber as well.

The bill also extends to Jan. 19 the duration of the floor for the Medicare work Geographic Practice Cost Index. Without an extension, the floor would expire at the end of the 2023, and physician practices in rural areas and other lower-wage markets would be looking at the prospect of a corresponding drop in their Medicare reimbursement rate.

With another deadline fast approaching for Congress to avert a sizable funding cut for disproportionate share hospitals, new legislation would offer substantial relief.

Minus any action by Congress, federal government funding expires Nov. 17, and the same deadline applies for avoiding the start of a four-year, nearly $32 billion cut to Medicaid disproportionate share hospital (DSH) payments.

On Nov. 8, the Senate Finance Committee unanimously passed a bill that not only would delay the funding reduction but also would cut it in half. That’s in contrast to previous legislative DSH fixes since the scheduled start of the cuts in 2014.

There would be no DSH funding decrease in FY24 or FY25, per the new bill. The cut would be limited to $16 billion over two years starting in FY26. Spending offsets for the overall bill would come out of the Medicare and Medicaid improvement funds, which can be used for purposes such as adjusting payments to providers and improving claims processing.

The prospects for including the full bill in this week’s bicameral efforts to keep the government funded were murky, but large groups of senators and representatives have expressed the need to avoid dropping a big funding cut on hospitals in the current financial and operational environment.

At the end of September, Congress waited until the last possible day to keep the government fully open, delay the DSH cut, and fund graduate medical education and other healthcare programs. Since then, Republicans have ousted Rep. Kevin McCarthy (Calif.) as speaker and installed Rep. Mike Johnson (La.) in the post.

Bolstering behavioral healthcare

The wide-ranging Senate bill focuses in large part on pharmacy benefit manager reform and behavioral health. The latter category includes provisions to temporarily enhance Medicare Part B payment for services that promote integration of behavioral healthcare with primary care.

With an eye toward improving reliable access to behavioral health providers, the bill also includes a provision requiring Medicare Advantage health plans to verify provider directory information every 90 days starting in 2026. At the discretion of the secretary of Health and Human Services (HHS), information on hospitals would not need to be verified more often than annually.

Plans would have to note providers for which directory information could not be verified. Providers no longer participating in the network would have to be unlisted within five business days. If an MA beneficiary visits a provider that’s wrongly listed as being in-network, the plan would have to cover any standard items and services furnished during the visit, with the beneficiary responsible only for in-network cost sharing.

By 2027, the CMS website would present accuracy scores for MA plans’ provider directories.

Medicare extenders included

Physician practices would stand to gain from the Senate committee’s bill. One provision would ease a scheduled 2024 reduction in Medicare physician payments, which are set to drop by 3.4% based on the update to the conversion factor. The pending bill would mitigate that via a 1.25% payment increase, leaving a reduction of about 2.15%.

The bill also funds key Medicare extenders, including a one-year extension of the work Geographic Practice Cost Index floor that’s currently scheduled to expire at the end of 2023. Without the floor in place, Medicare payments to physician practices in rural areas likely would fall.

Another provision for physicians would bring a one-year extension of the incentive payments for participants in advanced alternative payment models (APMs) as designated by the Medicare Access and CHIP Reauthorization Act of 2015. The incentive payment was 5% through performance year 2022, then dropped to 3.5% this year and is scheduled to expire going into 2024. The pending bill would establish a 1.75% bonus for 2024 advanced APM participation.

The bill would maintain Medicare payment for durable medical equipment at the higher rate that has applied to some geographic areas since passage of the CARES Act in 2020. If payment reverts to the pre-CARES Act formula, urban areas especially are likely to see decreases in DME payments.

The bill also would bring a two-year extension of the Independence at Home practice demonstration and would limit projected losses on Medicare payments made to outpatient clinical labs.

 A possible worry for hospitals

There is no mention in the Senate committee’s bill of creating funding offsets by expanding site-neutral payment in Medicare, but the Federation of American Hospitals (FAH) expressed concern that such a pay-for would be included as the legislation makes its way through Congress.

“This is no time for hospital cuts, particularly for struggling hospitals serving rural America,” FAH said in a statement attributed to Chip Kahn, president and CEO, after the bill passed the committee. “This ‘one-size-fits-all’ policy will ultimately threaten service, resulting in limits on access to care for seniors and others who are better served receiving necessary treatment in the hospital.”