As a spectator of the tug-of-war between the Centers for Medicare and Medicaid Services (CMS) and the American Hospital Association (AHA) for some years now, all I can do is shake my head at the industry group’s dug-in opposition to change.
In the latest face-off between the two entities, the AHA is again looking to overturn what’s called a “site-neutral payment policy,” meaning that CMS would pay hospitals the same amount they pay providers at outpatient clinics, ambulatory surgery centers and other such care delivery sites. They’re hoping the same federal judge who blocked a previous version of the policy will ride to their rescue again.
In healthcare – as in virtually every other business – payment should be based on what is delivered, not where it’s delivered. The fact that the same clinician performing the same procedure could be reimbursed at two wildly different rates was a vestige of a policy off which hospitals profited, CMS reimbursing them at higher rates.
This has distorted the healthcare delivery market in any number of ways, but most strikingly in the wave of physician practice acquisition that has allowed health systems to establish local market dominance and devastate private practice. Doctors might like the freedom of being able to run their own medical offices, but in what rational world would they continue to do so when they can see, on average, $ 75-$ 85 more per patient just by being part of a hospital?
The reason the AHA is so opposed is evident: Site-neutral payments are a direct threat to the way they run their business, and instead of making the fundamental changes they know are inevitable, they’d rather build their defense by masquerading as patient safety advocates.
Hospitals’ focus should be on patient outcomes, not gaming the system to receive higher reimbursements. CMS should be applauded for creating the market conditions that will push hospitals to prioritize value, and the ones that do will be increasingly capable of turning a profit in the years to come.
That’s because employers are tired of sending their employees to low-performing facilities, and as a result they’re taking matters into their own hands. They are finding which hospitals have the best outcomes for patients with certain conditions or needing certain procedures, and they are even willing to pay for employees’ travel costs just to ensure they get that higher-value healthcare experience. Organizations like Boeing, GM, Walmart and others have had their centers of excellence programs for years, and Amazon recently announced it will be sending its employees battling the disease to the City of Hope cancer center in Los Angeles.
These very same employers are even going so far as to build their own care clinics from the ground up, eliminating the need for them to make guesses about the quality of the care delivery organizations their employees have access to. Amazon launched, fittingly, a virtual one called Amazon Care.
Payers are pushing for value, too. Anthem no longer pays for hospital outpatient MRIs and CT scans, and UnitedHealthcare announced in October that, in the hopes of getting beneficiaries to visit lower-cost ambulatory surgery centers, it would only pay for surgeries in outpatient hospital settings if they find it medically necessary during prior authorization.
In light of these actions, the AHA must let go of the antiquated business model they keep clinging to. They must accept that as we inch closer to a value-based system, the only way they’ll protect their profit is by switching to a market-based business model. This model makes costs and quality transparent – a principle that promotes healthy competition to the benefit of patients – and ties costs to quality, the central tenet of value-based care.
This CMS-AHA fight cannot go on forever. Change isn’t just coming, it’s already upon us, and rather than continue to fiercely resist it, it would be a much better use of the AHA’s time – and that of the organizations it represents – to embrace and adapt to the market-based model of the future.