Welcome to the latest edition of the Gist Weekly. Obviously, the top story of the week is the results of the US Presidential Election, which will have significant, though still unclear, implications for the healthcare industry. In the interim, we’re covering the stories you may have missed while the dust settles on our reconfigured political landscape. As always, we appreciate your continued readership and invite you to forward this email to friends and colleagues—please encourage them to subscribe as well!
In the News
What happened in healthcare recently—and what we think about it.
- CMS finalizes OPPS rule with 2.9% pay boost. Last Friday, the Centers for Medicare & Medicaid Services (CMS) issued the CY 2025 final rule for the Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgery Center (ASC) Payment System. Payment rates for outpatient and ASC services will increase by 2.9% on net, which translates to a projected $2.2 billion revenue increase for hospitals. CMS will also be phasing in new standards around obstetric care. Examples of these changes include that all patient care units must be supervised by a sufficiently trained and experienced practitioner, and all facilities must make readily available basic equipment relative to the facility’s capabilities. Hospitals will also have to document staff training protocols and patient transfer policies, as well as conduct performance improvement projects on at least an annual basis.
- The Gist: Provider trade associations are protesting that Medicare’s payment updates are inadequate—with good reason, given that total per-day expenses are 6% higher in YTD 2024 than 2023. As a result, reliance on commercial revenue only grows, but so too does the importance of cost management in the outpatient setting. Many health system leaders believe investment in ASCs, which can operate at lower costs, is critical to capturing gains from the outpatient shift, with 60% of executives considering joint-venture partnerships in outpatient surgery, according to a recent survey.
- Providers receive adverse ruling in No Surprises lawsuit. Last week, the Fifth Circuit Court of Appeals partially vacated a district court decision determining how the No Surprises Act’s qualifying payment amount (QPA) is calculated. In response to an October ruling that excluded “ghost rates”—which cover negotiated items and services that providers rarely if ever deliver—from the QPA, the Department of Health and Human Services (HHS) appealed and won a reversal. Judges on the Fifth Circuit justified their verdict because they saw no clear way to draw the line between ghost rates and commonly performed services. The most recent decision also overturned the exclusion of case-specific agreements from the QPA. However, the appellate judges upheld the district court ruling that limited payers’ abilities to delay dispute resolutions and affirmed the amount of information payers must disclose in the independent dispute resolution (IDR) process.
- The Gist: The beleaguered IDR process of the No Surprises Act has received yet another court-ordered adjustment. Unlike most previous decisions, this one appears to favor payers at the expense of providers. More concerningly, the ruling may further undermine the IDR process itself. Congressional Research Service attributes the unexpectedly high number of disputes to providers’ beliefs that the QPAs are artificially low and general uncertainty about how disputes would be resolved. The reinstatement of ghost rates, plus the constant judicial back-and-forth, will only incentivize more disputes to be filed, adding to the backlog. Providers’ willingness to arbitrate has so far been rewarded, as they have won about 77% of disputes through the first half of 2023.
- MACPAC calls for transparency with state-directed Medicaid payments. The Medicaid and CHIP Payment Access Commission (MACPAC) recently released an issue brief recommending transparency and oversight reforms for state-directed Medicaid payments, which have grown significantly since their introduction in 2016. When comparing the 19 months prior to Feb. 1, 2023, to the 18 months following that date, the number of unique directed payment arrangements approved by CMS increased 21% and their associated revenue increased nearly 60%. These arrangements are intended to encourage provider participation in Medicaid managed care organizations, thereby improving access for beneficiaries. However, the MACPAC report raises concerns that a lack of data on provider-level spending and the sources of non-federal funding make it difficult to assess whether directed payment arrangements are achieving their policy goals.
- The Gist: Thanks to these state-directed payments, Medicaid has gone from being one of hospitals’ least-generous payers to a key source of their revenue growth. In an encouraging move, CMS recently published a final rule capping these payments at the statewide average commercial insurance rate, a fairly generous ceiling. Additionally, the bipartisan support for these arrangements across states may insulate them from changes targeted by the incoming Trump administration, which could include Medicaid cuts. However, government watchdogs have called attention to states’ practices of taxing providers and using federal matching funds to make them whole as a way to finance these payments. Hospitals are counting on these payments to continue, but their rapid growth will naturally draw more scrutiny and oversight.
Plus—what we’ve been reading.
- Is the end of cancer near? Published recently in the Wall Street Journal, this piece details the pharmaceutical innovations that could lead to the “future of cancer prevention.” There are several vaccines in early development that could largely prevent cancer from developing or returning in patients. Researchers are utilizing different proteins, mRNA, and DNA to stimulate immune responses for various cancer precursors, a stark advancement relative to the current state of cancer vaccines. Although most of these shots have only been tested among small, high-risk groups and target a specific type of cancer, results have been promising. Some experts are dreaming big, envisioning a world with universal cancer prevention.
- The Gist: Preventative cancer vaccines that could reduce or eliminate many types of cancer would be a dream come true for Biden’s Cancer Moonshot program, an initiative he hopes will define his legacy. Although experts have often pushed back on a singular cure for cancer, given that it’s a diverse family of diseases, vaccines could readily produce targeted cures for multiple forms of cancer before the patient even receives a diagnosis. Should these vaccines prove effective, they could radically transform the US healthcare system that currently dedicates significant resources towards cancer treatment. Billions of dollars, to many patients’ financial ruin, are dedicated to cancer treatment every year.
Graphic of the Week
A key insight illustrated in infographic form.
Providers increasingly frustrated by lost revenues from MA plans
After hearing reports from health systems about decreasing revenue capture from Medicare Advantage (MA) plans, this graphic dives into some of the trends driving this costly challenge providers are facing. MA plans’ popularity has swelled in recent years as seniors are drawn to the extra benefits and lower out-of-pocket costs. As a result, MA enrollees as a share of total inpatient days roughly doubled across all area types between 2015 and 2022. This trend has likely continued as MA penetration has only grown since 2022. This shift has been tough for providers because most MA plans require prior authorization for certain kinds of care, a burnout-driving and costly administrative demand for providers. Although the number of prior authorizations per MA enrollee has remained stable over recent years, providers are seeing more MA patients, leading to an increased burden. On top of that, the overall prior authorization denial rate jumped to 7.4% in 2022, after hovering around 5.7% for several years prior. These decisions can be overturned, but patients and providers often don’t file appeals, leading to higher rates of uncompensated care and lost revenues for providers. Unfortunately, these higher costs have brought many providers to a breaking point in contract negotiations with MA plans, leading to care disruptions that ultimately hurt patients the most.
This Week at Kaufman Hall
What our experts are saying about key issues in healthcare.
Not-for-profit healthcare leaders may be uniquely poised to embrace “servant leadership,” a concept that elevates employee contributions to build forward-looking, innovative organizations.
In a new blog, Lisa Goldstein explores servant leadership with Nancy Howell Agee, CEO Emeritus of Carilion Clinic, and how “leading from behind” is critical in organizations where the most important people are those who directly manage patient care. Agee also notes that leaders must still be able to make difficult decisions while leading their organizations—adding that executing on those decisions is easier when employees know they’ve been heard.
On Our Podcast
The Gist Healthcare Podcast—all the headlines in healthcare policy, business, and more, in ten minutes or less every other weekday morning.
Last Monday, JC spoke with Benjamin Hamar, MD, Director of the Maternity Center at UMass Memorial in Worcester, MA, about his system’s postpartum hospital-at-home program.
Although there will be no interview published this Monday, please continue tuning into our Gist Healthcare Podcast to hear about the big stories in healthcare. This week, we covered:
- Congressional efforts to reverse the Medicare physician pay cut
- Novant finalizes its acquisition of UCI Medical Affiliates
- DOJ defers telehealth company Cerebral’s fine over inability to pay
To stay up to date, be sure to tune in every Monday, Wednesday, and Friday morning. Subscribe on Apple, Spotify, Google, or wherever fine podcasts are available.
Thanks for reading! We’ll see you next Friday with a new edition. In the meantime, check out our Gist Weekly archive if you’d like to peruse past editions. We also have all of our recent “Graphics of the Week” available here.
Best regards,
The Gist Weekly team at Kaufman Hall
