Over the past several years, physician office–based infusion services have been migrating to the hospital outpatient setting. The 2 main reasons for this shift can be seen as (1) financial pressures that have made the private practice model increasingly difficult to sustain, and (2) hospitals generally enjoy better payment terms than private practices, and therefore generate higher margins, particularly for hospitals with access to the 340B drug pricing program. By coming together, both sides stand to potentially benefit—the hospital’s business grows and care becomes better integrated, while the physicians achieve a reasonable degree of financial security. Payers, however, usually end up paying more.
Significant Savings from New Provision in the Budget Act
For some time now, independent physician groups have been pointing out that outpatient care delivered in the hospital is more costly than care delivered in the private office, and numerous initiatives and pilot studies have been undertaken to quantify this cost differential and to find better alternatives. The message has been heard loud and clear by Congress, which continues to look for ways to reduce spending.
In fall 2015, with Republicans and Democrats at odds over nearly all issues, a surprising event occurred: a bill with bipartisan support was passed. The Bipartisan Budget Act of 2015 (BIBA; H.R. 1314) went into effect on November 2, 2015.1 One of the bill’s provisions, Section 603, “Treatment of Off-Campus Outpatient Departments of a Provider,” is of particular interest to those involved in the delivery of oncology care. The projected savings from this provision alone stands at $9.3 billion during the course of 10 years.1
This provision states that any new, off-campus hospital outpatient department will be reimbursed by Medicare at the lower-cost Physician Fee Schedule or the ambulatory surgery center rates rather than under Medicare’s Hospital Outpatient Prospective Payment System, beginning on January 1, 2017.1 Therefore, the shift in the site-of-service trend will very likely slow or stop entirely.
The new law does not apply to medical centers or practices that were in place before November 2, 2015.1 But what about practices that were in the process of changing to hospital-based status at the time of the enactment of the law?
According to data presented at the 2016 annual meeting of the Association of Community Cancer Centers, 26% of oncology centers that were in the process to switch to a hospital-based status had decided to abandon the idea.2
Savings Could Come at a Cost
Not surprising, although the language is clear, the devil lies in the details of implementation, and there are many. First, if a new, off-campus hospital-based center is part of a hospital with 340B status, will that status be affected? This question arises in large part because eligibility to participate in the 340B drug purchasing program is determined by the Health Resources & Services Administration (HRSA), which has also been seeking ways to reduce the utilization of the program.
Will HRSA then find language that would exclude these off-campus hospital outpatient departments? If yes, then the financial analyses that lead, at least in part, to the creation of these centers will overstate the results substantially. In fact, such a change could also impact the centers that were exempted in Section 603 of BIBA, and could lead to the unwinding of those deals.
To the potential financial changes for these centers we must also add the question of what nonfederal payers will do. Often, they are quick to adopt the rules of the Centers for Medicare & Medicaid Services (CMS) when there are cost-savings to be achieved, making the bottom line for most, or all, of these centers far slimmer.
It is up to CMS to develop regulations about reimbursements. These regulations include detailed instructions on how to bill for services, such as which codes to use (most codes are the same, whether billed in the office setting or in the hospital outpatient setting, but some differ), what changes to the supervision requirements may be made, and clarification on any packaging rules and coding edits that are currently in place.
To have the new regulations in place, CMS will have to release the proposed rules for comment and finalize them before January 1, 2017.
Potential Negative Impact on Physicians
It is clear that the financial impact of all this will not benefit hospitals, and it will potentially have a negative impact on physicians who are already involved in off-campus hospital outpatient departments if hospitals seek to reduce their compensation because of reduced margins.
By contrast, CMS stands to achieve significant savings. In a recent presentation at the 2016 Association of Community Cancer Centers annual meeting, Ronald R. Barkley, MS, JD, Cancer Center Business Development Group, Bedford, NH, noted that the savings for CMS could reach nearly $1.8 million in 1 year for infusion services alone.2
In the end, several things could happen, including:
- More than 26% of the deals that were in progress on November 2, 2015, could be abandoned
- Some of the existing off-campus hospital outpatient departments could unwind, because of:
- Reduced margins from 340B exclusions
- Reduced margins from nonfederal payer adoption of the site-neutrality law
- Reduced physician compensation that will send them back to private practice.
- US Department of Health & Human Services. Fiscal year 2017 budget in brief-Centers for Medicare & Medicaid Services: Medicare. www.hhs.gov/about/budget/fy2017/budget-in-brief/cms/medicare/index.html#. Accessed April 11, 2016.
- Barkley R. Demystifying the impact of site neutral payment on community cancer care. Presented at the Association of Community Cancer Centers annual meeting; March 2-4, 2016; Washington, DC.