Refuse to Buy Subsidized Coverage? No Charity Care for You.

Some hospitals are toying with the idea of scaling back their charity programs in response to worries that providing free or discounted care to patients with low incomes and no insurance may dissuade them from purchasing government-subsidized health insurance through the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) Health Insurance Exchanges, according to a report by Kaiser Health News (KHN).

Charity Care Policies

While the ACA requires that hospitals make their written charity care policies widely available, it does not impose any specific requirements as to eligibility for such programs.

According to the charity care policy posted online by Southern New Hampshire Medical Center, “[A]pplicants who refuse to purchase federally-mandated health insurance when they are eligible to do so will not be awarded charity care.” The policy also cuts off charity care for those who choose not to apply for the state’s Medicaid expansion program.

Alternatives to Limiting Charity Care

While some hospitals are enacting restrictions like this one, others are choosing simply to require patients to make a contribution toward the services received, such as $100 for emergency care.

“Patients will continue to receive needed medical care regardless of their ability to make payment at the time of service,” Kim Kitson, spokeswoman for Barnes Jewish Hospital in St. Louis told KHN. The hospital provides discounts for patients with incomes up to three times the federal poverty level.

Considerations for Hospitals

In evaluating possible changes to their charity policies, hospital executives must also weigh whether patients are unwilling to pay or if they could not afford purchasing coverage even with a government subsidy. Ultimately, though, KHN reports that hospitals have a strong interest in having more insured patients, especially since the ACA cuts government payments to providers for uncompensated care.

Todd Nelson of the Healthcare Financial Management Association told KHN, “Hospitals have always encouraged patients to apply for coverage they are entitled to receive, whether commercial insurance through employer or through programs like Medicaid.”

How Should Prices for Prescription Drugs Be Set?

Last year, the FDA approved a new drug for treatment of hepatitis C, Sovaldi®, made by Gilead Sciences, Inc (Gilead). It entered the market in 2014. According to reports,  Sovaldi is highly effective. A 12-week course of treatment cures hepatitis C in most patients. Gilead’s price: $1,000 per pill, $84,000 to complete a course of treatment. Announcement of the price sparked outrage and a Senate Finance Committee investigation. On July 11, 2014, Senators Charles Grassley (R-Iowa) and Ron Wyden (D-Ore.), the committee chair, sent a letter to Gilead demanding documentation of its pricing methodology and copies of financial statements, filings with the Securities and Exchange Commission (SEC) and all aspects of Gilead’s 2012 acquisition of the original developer, Pharmasset, Inc.

Senators Grassley and Wyden noted several facts that caused concern:

  • Pharmasset’s final filing with the SEC reported total research and development costs of $176.7 million from 2009 through 2011 and attributed $62.4 million directly to Sovaldi.
  • Gilead’s advertising and expenses grew from $116.6 million in 2011 to $216.2 million in 2013.
  • Gilead is seeking approval to market Sovaldi in combination with other drugs, which will increase the cost of treatment.
  • Gilead is allegedly planning to sell the drug overseas at highly discounted prices; for example, a course of treatment in Egypt will reportedly cost $900, a 99 percent discount from the list price in the United States.
  • Of the 27 physicians who developed the treatment guidelines issued by the American Association for the Study of Liver Disease and the Infectious Disease Society of America, 18 disclosed either a direct or an institutional financial relationship with Gilead. Gilead also provided funding to both organizations and a collaborating partner, the International Antiviral Society USA.
  • 30,000 patients in the U.S. underwent treatment with Sovaldi in the first quarter of 2014.
  • About 3.2 million residents of the United States have hepatitis C, of whom 1.8 million are incarcerated and more than 100,000 with the diagnosis are enrolled in Medicare Part D. If 25,000 of the Medicare beneficiaries were treated, Medicare Part D spending would increase by $2 billion.

One commentator noted that the total cost of treating hepatitis C with Sovaldi is far less than the lifetime cost of treating a patient with AIDS. She suggested that the objections to the price are the result of pent-up demand and the need to pay the entire cost over a short period of time.

Extraordinary Income

For the three months ending June 30, 2014, Gilead reported income from sales of Sovaldi alone at $3.48 billion. The National Coalition on Health Care (NCHC), which called the price “unsustainable and abusive” before the earnings report was released, suggested that Gilead has “some room” to drop the price. Both the NCHC and the Pacific Business Group on Health called for stakeholders to work together to arrive at fair, sustainable prices that reward innovation.  Gilead has not acted on the suggestion, however.



Highlight on Maryland: New Hospital Payment System Being Implemented

Maryland is in the process of transitioning how hospitals are paid under its waiver from the Medicare program to a five-year demonstration program approved by CMS’ Center for Medicare and Medicaid Innovation in January 2014. The payment system will continue to be an all-payer system in which all payers will be paid the same rate for the same service.  The difference is that the new payment system will be a global budgeting system in which hospitals will be paid based on their total expected revenues for the year as opposed to being paid a specific fee for each service.

Medicare Waiver

The waiver from Medicare and Medicaid payment rates went into effect on July 1, 1977. Since that time all hospitals in Maryland have been paid the same rate for the same service no matter if the payer is Medicare, Medicaid or a private insurer.  The Health Service Cost Review Commission (HSCRC) was created by the Hawaiian legislature in 1971.  That law gave the HSCRC the authority set hospital payment rates for all payers.  Federal law took precedent to the Maryland law and it took several years to negotiate with the federal government to participate in the all-payer system, according to a report from the HSCRC. No hospital in Maryland has ever been paid under Medicare’s inpatient prospective payment system (IPPS) or the outpatient prospective payment system (OPPS).

Global Payment System

CMS wanted to move Maryland away from a fee-for-service payment system and towards a payment system similar to IPPS and OPPS and began negotiating with Maryland to do so.  On January 10, 2014 a 5-year demonstration program was approved that would replace the waiver.   Under the demonstration program, Maryland will institute a global payment model within five years. House bill 298, approved on May 5, 2014, requires the HSCRC to develop guidelines for the establishment of global budgets for each hospital and may (1) establish hospital levels and rate increases in the aggregate or on a hospital specific basis and (2) promote and approve alternate methods of rate determination and payment of an experimental nature, according to a legislative synopsis.  Under the global payment model each hospital enters into contract with HSCRC.  Each hospital’s total annual revenue is known at the beginning of each fiscal year and annual revenue is determined from a historical base period that is adjusted to account for inflation updates, infrastructure requirements, population drive volume increases, performance in quality-based or efficiency-based programs, changes in payer mix and changes in levels of uncompensated care. As of July 16, 2014, the HSCRC reports that 13 hospitals have completed global revenue contracts. Under the demonstration program Maryland is required to limit its annual per-capita total hospital growth to 3.58 percent per year.   The new program will be required to reduce Medicare expenditures by $330 million over the five years of the demonstration. Savings will be measured by comparing the state’s Medicare per-capita total hospital growth to the national Medicare per-capita total hospital cost growth.

Quality Targets

In addition to meeting these fiscal goals, Maryland hospitals will have to meet quality of care targets as well.  Hospital readmissions will have to be reduced from the aggregate 30-day unadjusted all-cause, all-site readmission rate over the 5 year period.  Maryland hospitals will have to achieve a 30 percent reduction in 65 potential preventable conditions over the five-year period; with a goal of an annual reduction of 6.89 percent per year. Maryland’s Governor Martin O’Malley recently announced an 11.5 percent reduction in preventable hospitalizations per 100,000 Marylanders since 2011.  Governor O’Malley credited this reduction to the use of the Chesapeake Regional Information System for our Patients (CRISP) which is a secure health information exchange that all 46 hospitals in the state and a large number of other providers use. CRISP allows physicians to access a patient’s medical records from any participating provider in CRISP in real-time. Using CRISP physicians have access to prior medical records, lab results, radiology results, and other data. The use of CRISP has greatly improved coordination of care and reduced the need to repeat costly diagnostic tests resulting in $65 million in savings according to Governor O’Malley. Maryland is making strides in implementing its new payment and quality of care systems under the new demonstration.  Progress is essential because if these goals are not met within 5 years the demonstration will not be extended and hospitals in Maryland will revert to being paid under IPPS and OPPS for Medicare services.

Telehealth Expansion Gets Bipartisan Congressional Support

July 2014 has brought a lot of activity toward expanding telehealth services to improve access to health care for seniors and others and lower the costs of health care for federal health care programs. Members of both houses of Congress and both political parties have introduced bills that would require Medicare to expand telehealth services provided to Medicare and Medicaid beneficiaries. Moreover, CMS’ 2015 Physician Fee Schedule Proposed rule includes a proposal to add annual wellness visits, psychotherapy services, and prolonged evaluation and management services to the Medicare telehealth benefit. In announcing its appreciation for the efforts of legislators to push for improvements in telemedicine coverage, the American Telemedicine Association (ATA) stated that the “bills are instrumental in demonstrating widespread congressional support.”

Telehealth Parity Act of 2014 

On July 31, 2014, House of Representatives members Mike Thompson (D-Calif.), Gregg Harper (R-Mississippi), and Peter Welch (D-Vermont) introduced the Medicare Telehealth Parity Act of 2014 (HR 5380) (Discussion Draft) , which “creates a [three] phase approach over four years to expand coverage of telemedicine-provided services and removes arbitrary barriers that limit access to services for Medicare beneficiaries,” according to an ATA press release. Thompson explained that the bill puts telehealth services under Medicare on the path toward parity with in-person health care visits. The legislation has been referred to the House Energy and Commerce Committee and the House Committee on Ways and Means.

The phase-in begins in rural areas and gradually removes geographic restrictions to patient care. The bill also provides for telehealth services furnished by diabetes educators as well as outpatient therapists, including speech language therapist, audiologists, respiratory therapists, and physical therapists; allows remote patient management services for chronic health conditions such as diabetes, congestive heart failure, and chronic obstructive pulmonary disease, including patient monitoring, patient training, clinical observation, assessment, treatment and other services; and expands home telehealth, hospice, and home dialysis.  The bill requires Government Accountability Office (GAO) to conduct a study of the effectiveness of remote patient monitoring on decreasing hospital readmissions for the chronic conditions included in the bill and the savings to Medicare as well as the implications of greater use of patient monitoring with respect to payment and delivery system transformations. The bill is discussed in more detail in a post by Bryant Storm titled, “Bill Would Stretch Telemedicine to Physical Therapy, Bigger Populations.”

Telehealth Enhancement Act of 2014

The Telehealth Enhancement Act of 2014 (S. 2662), which was introduced by Senators Thad Cochran (R. Mississippi) and Roger Wicker (R-Mississippi), would expand the use of telehealth technology to improve health care for seniors and other patients in underserved areas as well as help lower health care costs. The legislation would waive statutory Medicare restrictions on telehealth services to encourage greater use of telehealth technologies and would extend telehealth coverage to all critical access and sole-community hospitals regardless of metropolitan status. The legislation also covers home-based video services for hospice care, home dialysis, and homebound seniors. Medicare home health payments would be adjusted. In addition, the bill would allow states to modify Medicaid coverage to include telehealth services for women with high-risk pregnancies. The bill has been referred to the Senate Finance Committee. According to the ATA, the bill “includes several provisions that may see significant budget savings and build on recent payment innovations such as accountable care organizations and other incremental budget-sensitive proposals.”

This Senate bill is a companion to legislation introduced by Harper, Thompson, Welch, and Devin Nunes (R-Calif.) last year, known as the Telehealth Enhancement Act of 2013 (HR3306). Many of the provisions of HR 3306 are reflected in S. 2662. The ATA Hub summarized the provisions of HR 3306, stating that such provisions include incentive for reducing hospital readmissions, advancing a health home approach as found in the Medicaid program, care coordination for chronic illness such as Parkinson’s, flexibility for accountable care organizations to offer telehealth services, expansion of geographic locations, coverage of home-based video services, and coverage of Medicaid telehealth services for high-risk pregnancies. HR 3306 is pending in the House Ways and Means Committee and House Energy and Compliance Commerce. According to Wicker, “Telehealth cuts down travel time and increases access to specialists for residents in many rural areas who do not live near these essential health care resources.”

CMS Proposed Rule

CMS proposed to add the following services to the list of services that can be furnished to Medicare beneficiaries under the telehealth benefit: annual wellness visits, including a personalized prevention plan of service, initial visit, and subsequent visit; psychotherapy services, including family psychotherapy with and without patient present; and prolonged evaluation and management services requiring direct patient contact beyond the usual service. CMS found that these services meet the criteria for being on the Medicare telehealth list and are sufficiently similar to psychiatric diagnostic procedures or office outpatient visits currently on the telehealth list to qualify for coverage.


“Telehealth  is one of the most promising aspects of the health care field,” according to Harper. The use of telehealth technology and services may be the answer for improving access to health for seniors and others in underserved areas and lowering health care costs; however, Wayne Caswell, member of ATA and Founder of Modern Health Talk, sees this as “a step in the right direction” but “just a baby step” and noted that he thinks “much more is needed.”  In an article, written in response to the introduction of the Telehealth Enhancement Act of 2013 bill, Caswell cautioned that the telehealth bills introduced in Congress may get resistance from states seeking to “preserve the status quo and the authority of state medical boards.” Other risks related to the expansion of telemedicine services such as privacy, confidentiality, credentialing, and failure of technology for health care providers are discussed in the post, “Growth of Telemediccine Services Brings the Need to Address Associated Risk.