Rural hospitals hit hard by reductions in Medicare disbursements, declining population

Approximately 3 percent of all rural hospitals closed in the period between 2013 and 2017, which can affect rural residents’ access to health care services. The U.S. Government Accountability Office (GAO) did a study to determine how HHS supports and monitors rural hospitals’ financial viability and rural residents’ access to hospital services. The study also details the number and characteristics of rural hospitals that have closed as well as what is known about the factors that contributed to those closures. According to the GAO report, Medicare Dependent Hospitals and for-profit hospitals were some of the hardest hit by reductions in Medicare disbursements, while hospitals in Medicaid expansion states and states with higher enrollment under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) were the least affected (GAO Report, GAO-18-634, September 30, 2018).

Rural hospitals

In 2017, 2,250 general acute care hospitals in the United States met the definition of rural. Rural hospitals represented approximately 48 percent of hospitals nationwide and 16 percent of inpatient beds. Rural hospitals spread across 84 percent of the United States land area that is classified as rural and served 18 percent of the United State population that lived in those areas. Rural areas tend to have a higher percentage of elderly residents than urban areas, a higher percentage of residents with limitations in activities caused by chronic conditions, and a lower median household income. Rural areas also face a decreasing population and slow employment growth.

Payment policies and programs

HHS provides key financial support to rural hospitals to provide rural residents access to hospital services through a number of payment policies and programs. CMS administers five rural hospital payment designations, in which rural or isolated hospitals that meet specified eligibility criteria receive higher reimbursement for hospital services than they otherwise would have received under Medicare’s standard payment methodology. The Federal Office of Rural Health Policy (FORHP) administers multiple grant programs, cooperative agreements, and contracts that provide funding and technical assistance to rural hospitals. CMS’s Center for Medicare and Medicaid Innovation tests new ways to deliver and pay for healthcare. There are also the broader HHS payment policies and programs such as Medicare and Medicaid base payments, Medicare and Medicaid uncompensated care payments, the state innovation models initiative, as well as other targeted HHS payment policy and programs.

Rural hospital closures

An analysis of data shows that from 2013 through 2017, 64 rural hospitals closed. This is more than twice the number of rural hospitals that closed during the prior 5-year period and accounts for more than the share of urban hospitals that closed and more than the number of rural hospitals that opened. Rural hospitals in the South represented 38 percent of the rural hospitals in 2013 but accounted for 77 percent of the rural hospital closures from 2013 through 2017. Medicare dependent hospitals represented 9 percent of the rural hospitals in 2013 but accounted for 25 percent of the rural hospital closures.

For-profit hospitals are twice as likely to experience financial distress relative to government-owned and non-profit hospitals and represented 11 percent of rural hospitals in 2013 but accounted for 36 percent of closures. Bed size also seems to be a factor as rural hospitals with between 26 and 49 inpatient beds represented 11 percent of the rural hospitals in 2013 but accounted for 23 percent of the closures. While critical access hospitals (CAHs), which have 25 acute inpatient beds or less and make up a majority of the rural hospitals, were less likely than other rural hospitals to close. This may be due, in part, to the CAH payment designation.

Contributing factors

Data shows that rural hospital closures were generally preceded and caused by financial distress. This is partially due to a decrease in patients seeking inpatient care at rural hospitals. There are an increasing number of federally qualified health centers or newer hospital systems outside of the area that create increased competition for rural hospitals. Technological advances have also allowed for more services to be provided in outpatient settings. There is also data showing that the years 2010 through 2016 marked the first recorded period of rural population decline.

Rural hospitals are sensitive to changes in Medicare payments because, on average, Medicare accounted for approximately 46 percent of their gross patient revenues in 2016. Reductions in nearly all Medicare reimbursements and reductions in Medicare bad debt payments have contributed to negative margins for rural hospitals.

Medicaid expansion

According to stakeholders that were interviewed and literature that was reviewed, the strongest factor that likely strengthened the financial viability of rural hospitals was the increased Medicaid eligibility and enrollment under the ACA. A 2018 study showed that Medicaid expansion was associated with improved hospital financial performance and a substantially lower likelihood of closure, especially in rural markets. Drops in uninsured rates in 2008 through 2009 and 2014 through 2015 corresponded with states’ decisions to expand Medicaid, with small towns and rural areas seeing the largest increase in Medicaid coverage and decline in uninsured. Data shows that from 2013 through 2017, rural hospitals in states that had expanded Medicaid as of April 2018 were less likely to close compared with rural hospitals in states that had not expanded Medicaid.

Kusserow on Compliance: OIG toolkit for calculating opioid levels and opioid misuse risk

The OIG toolkit provides detailed steps for using prescription drug claims data to analyze patients’ opioid levels and identify certain patients who are at risk of opioid misuse or overdose. It is based on the methodology that OIG has developed in its extensive work on opioids. This provides technical information to support the OIG’s public and private sector partners, such as Medicare Part D plan sponsors, private health plans, and State Medicaid Fraud Control Units. It is intended to assist OIG partners with analyzing their own prescription drug claims data to help combat the opioid crisis. It provides steps to calculate patients’ average daily morphine equivalent dose (MED), which converts various prescription opioids and strengths into one standard value. This measure is also called morphine milligram equivalent (MME). The toolkit includes a detailed description of the analysis and programming code that can be applied to the user’s own data. The resulting data can be used to identify certain patients who are at risk of opioid misuse or overdose. Users can also modify the code to meet their needs, such as identifying patients at other levels of risk. The toolkit has three chapters:

 

(1) Analysis of Prescription Drug Claims Data,

(2) Explanation of the Programming Code To Conduct the Analysis, and

(3) Programming Code.

 

Opioid abuse and overdose deaths are at epidemic levels in the United States. As one of the lead federal agencies fighting health care fraud, the OIG is committed to supporting public and private partners in its efforts to curb the opioid epidemic. These partners include Medicare Part D plan sponsors, other private health plans, State Medicaid Fraud Control Units, State prescription drug monitoring programs, and researchers. They can use this toolkit to analyze claims data for prescription drugs and identify patients who may be misusing or abusing prescription opioids and may be in need of additional case management or other follow-up. This toolkit can also be used to answer research questions about opioid utilization.

Copies can be obtained by contacting the Office of Public Affairs at Public.Affairs@oig.hhs.gov.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

Connect with Richard Kusserow on Google+ or LinkedIn.

Subscribe to the Kusserow on Compliance Newsletter

Copyright © 2018 Strategic Management Services, LLC. Published with permission.

Kusserow on Compliance: Three new projects added to the OIG Work Plan in April

The OIG regularly updates its Work Plan as it continues to assess relative risks in HHS programs and operations that may lead to new projects. The most recent changes involved adding six new projects to the OIG’s audits and evaluations that are planned or underway. In making these additions, the OIG considered a number of factors, including mandates set forth in laws, regulations, or other directives; requests by Congress, HHS management, or the Office of Management and Budget; top management and performance challenges facing HHS; work performed by other oversight organizations (e.g., the GAO); management’s actions to implement OIG recommendations from previous reviews; and potential for positive impact.

New Projects Added

  1. Medicaid Nursing Home Supplemental Payments will be reviewed by the Office of Audit Services for completion in fiscal year (FY) 2019. Prior OIG and GAO audits have found that Federal supplemental payments often benefit the state and local governments more than the nursing homes. The OIG plans to review the nursing home supplemental payment program’s flow of funding and determine how the funds are being used. CMS approved a nursing home supplemental payment program in certain states that pays the difference between Medicare and Medicaid rates for nursing home services. In some of these programs, local governments fund the states’ share of the supplemental payments through intergovernmental transfers.

 

  1. The OIG plans to review the extent to which drug formularies developed by Part D sponsors include drugs commonly used by dual-eligible beneficiaries as required. The Patient Protection and Affordable Care Act (ACA), under Section 3313, requires OIG to conduct this review annually. This will be the eighth report issued. The work will be performed by the Office of Evaluation and Inspections with a target completion date of FY 2018.

 

  1. Audit of CMS Medicare Overpayment Recoveries Related to Prior OIG Recommendations, targeted for completion in FY 2019. In the last couple of years, the OIG issued 153 audit reports that related to the Medicare program, containing 193 monetary recommendations totaling $648 million. Of the $648 million in recommended overpayment recoveries, CMS agreed to collect $566 million applicable to 190 recommendations. The OIG plans to determine the extent to which CMS: (1) collected agreed upon Medicare overpayments identified in OIG audit reports and (2) took corrective action in response to the recommendations in a prior audit report examining CMS’ overpayment recoveries (A-04-10-03059). In that report, OIG recommended CMS enhance its systems and procedures for recording, collecting, and reporting overpayments. The OIG also recommended that CMS provide guidance to its contractors on how to document that overpayments were actually collected.

 

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

Connect with Richard Kusserow on Google+ or LinkedIn.

Subscribe to the Kusserow on Compliance Newsletter

Copyright © 2018 Strategic Management Services, LLC. Published with permission.

CY 2019 Medicare Part C and D policy changes and updates finalized

CMS has issued a Final rule making revisions to the Medicare Advantage (MA) (Part C) and prescription drug benefit (Part D) programs based on its continued experience in the administration of these programs and to implement certain provisions of the Comprehensive Addiction and Recovery Act of 2016 (CARA) (P.L. 114-198) and the 21st Century Cures Act (P.L. 114-255). The major provisions of the Final rule include: (1) the implementation of the CARA provisions governing the establishment of drug management programs, (2) revisions to timing and method of disclosure requirements for MA and Part D plans, and (3) preclusion list requirements for prescribers in Part D and individuals and entities in MA, cost plans, and Programs of All-Inclusive Care for the Elderly (PACE) (Final rule, 83 FR 16440, April 16, 2018).

On November 28, 2017, CMS published the Proposed rule (see Proposed CY 2019 Part C and D changes address opioid misuse and numerous other policy concerns, Health Law Daily, November 17, 2017). While this Final rule finalizes several of the provisions from the Proposed rule, there are a number of provisions from the Proposed rule that CMS intends to address later and a few that it does not intend to finalize. These provisions are discussed in the Final rule.

CARA provisions

CARA includes new authority for Part D plans to establish drug management programs effective on or after January 1, 2019. This Final rule establishes a framework under which Part D plan sponsors may establish a drug management program for beneficiaries at risk for prescription drug abuse or misuse, or “at-risk beneficiaries.” Specifically, under drug management programs, Part D plans will engage in case management of potential at-risk beneficiaries, through contact with their prescribers, when such beneficiary is found to be taking a specific dosage of opioids or obtaining them from multiple prescribers and multiple pharmacies who may not know about each other. Sponsors may then limit at-risk beneficiaries’ access to coverage of controlled substances that CMS determines are “frequently abused drugs” to a selected prescribers or network pharmacies after case management with the prescribers for the safety of the enrollee.

CMS also limits the use of the special enrollment period (SEP) for dually- or other low income subsidy (LIS)-eligible beneficiaries by those LIS-eligible beneficiaries who are identified as at-risk or potentially at-risk for prescription drug abuse under such a drug management program. Finally, these provisions will codify the current Part D Opioid Drug Utilization Review (DUR) Policy and Overutilization Monitoring System (OMS) by integrating this current policy with drug management program provisions.

The purpose of these CARA drug management program provisions is to create a lock-in status for certain at-risk beneficiaries. In addition to the benefits of preventing opioid and benzodiazepine dependency in beneficiaries, CMS estimates, in 2019, a reduction of $19 million in Trust Fund expenditures because of reduced opioid scripts. This $19 million reduction modestly increases to a $20 million reduction in 2023.

Timing and method of disclosure requirements

CMS is finalizing changes to align the MA and Part D regulations in authorizing CMS to set the manner of delivery for mandatory disclosures in both the MA and Part D programs. CMS will use this authority to allow MA plans to meet the disclosure and delivery requirements for certain documents by relying on notice of electronic posting and provision of the documents in hard copy when requested, when previously the documents, such as the Evidence of Coverage (EOC), had to be provided in hard copy. CMS is also changing the timeframe for delivery of the MA and Part D EOC to the first day of the Annual Election Period (AEP), rather than 15 days prior to that date.

Allowing MA and Part D plans to provide the EOC electronically will alleviate plan burden related to printing and mailing and reduce the number of paper documents that enrollees receive from plans. In addition, changing the date by which plans must provide the EOC to enrollees will (1) allow plans more time to finalize the formatting and ensure the accuracy of the information in the EOC, and (2) separate the mailing and receipt of the EOC from the Annual Notice of Change (ANOC), which describes the important changes in a patient’s plan from one year to the next.

CMS estimates that 67 percent of the current 47.8 million beneficiaries will prefer use of the internet versus hard copies. This will result in a savings to the industry of $54.7 million each year, 2019 through 2023, due to a reduction in printing and mailing costs.

Preclusion list requirements for prescribers and providers

The Final rule rescinds the current regulatory requirement that prescribers of Part D drugs and providers of MA services and items must enroll in Medicare in order for the drug, service, or item to be covered. Instead, a Part D plan sponsor will be required to reject, or require its pharmacy benefit manager to reject, a pharmacy claim for a Part D drug if the individual who prescribed the drug is included on the “preclusion list.” Similarly, an MA service or item will not be covered if the provider that furnished the service or item is on the preclusion list.

The preclusion list will consist of certain individuals and entities that are currently revoked from the Medicare program under 42 CFR sec. 424.535 and are under an active reenrollment bar, or have engaged in behavior for which CMS could have revoked the individual or entity to the extent applicable if they had been enrolled in Medicare, and CMS determines that the underlying conduct that led, or would have led, to the revocation is detrimental to the best interests of the Medicare program.

CMS estimates that for 2019, the preclusion list provision will save providers $34.4 million. For 2020 and future years, there will be no savings. The $34.4 million in savings to providers arises because of removal of the requirement of MA providers and suppliers and Part D prescribers to enroll in Medicare as a prerequisite for furnishing health care items and services. Part C providers and suppliers will save $24.1 million in reduced costs while Part D providers will save $10.3 million in reduced costs.