Just before the elections, the Centers for Medicare and Medicaid Services (CMS) released a final rule extending changes to their 340B drug reimbursement policy to include hospital outpatient departments. CMS also expanded the application of site-neutral payment policies, addressing a flaw where the government would pay hospitals far more money to perform the same services as non-hospital providers, leading to all the bad incentives one might expect.
The rule changes, though expected, were not warmly welcomed by the hospital industry. The American Hospital Association (AHA), already embroiled in a legal dispute over the 340B payment cuts, is also ready to challenge the site-neutral payments, which the group argues will hurt them and their patients, about which they are halfway correct.
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Rita Numerof Dr. Rita Numerof is the co-founder and President of Numerof. Her dedication, leadership, and passion have guided Numerof into its third decade of continuous growth and success. From the firm’s inception, Rita has focused on developing new business models for companies in industries undergoing major market changes. Her work has spanned industries that […]
Site-neutral payments are a good thing in and of themselves. The last thing the healthcare industry needs is more profit-driven provider consolidation. By restoring everyone to an equal footing, doctors and other clinicians will be able to make choices about the types of practices they want to run, without needing to “go in-house” to make a living.
Other physician groups have been quick to recognize this fact. The American Association of Family Physicians, the American College of Physicians, and the Partnership to Empower Physician-Led Care all recently lauded the changes, heralding the CMS’ move as a victory for consumers and physicians alike.
There is a certain irony in the idea that a rule that refuses to play favorites with delivery site could be construed as an instance of administrative overreach. Yet to hear the AHA tell it, this is exactly what occurred with the passage of site-neutral payments. The AHA alarmingly adds that the policy changes would disproportionately harm small rural hospitals, which have indeed been shuttering their doors at increasingly rapid rates in recent years.
If the AHA were truly worried about rural hospital centers, one wonders what’s taken them so long to do anything about them. Rural hospitals’ financial hardship is a devastating problem with real consequences, but past closures are in no way related to a policy that won’t take effect until next year.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
Importantly, the AHA does not represent the views of all its members. We have worked with delivery organizations that realized years ago that the old financial models were eventually going to crumble under their own contradictions. These leading organizations have invested both time and money in developing new models focused on patient outcomes and financial approaches like bundled payments reflecting transparency in cost and quality.
AHA’s jabs against the anticipated 340B spending cuts are even more feeble. These are projected to help “lower out-of-pocket costs for beneficiaries and save Medicare as much as $380 million in 2019.” It is truly astonishing that so many within the industry choose to exhaust their dwindling resources and waning energy by resisting market-based change, rather than using these changes to revitalize their practices, build bridges with new entrants in healthcare and accelerate uptake of value-based care models.
Victory for America’s hospitals won’t come from a successful lawsuit. That’s just a delaying tactic. As the healthcare industry continues to suck up an even greater share of the economy and tax dollars, voters will continue to clamor for change.
What’s more (and worst of all), a fleeting victory from the bench might cause hospitals to feel falsely vindicated in continuing toxic business practices. This artificial sense of security would further stagnate the industry’s push toward value, usher in more mergers, lead to more closures, and increasingly cause these institutions — which remain a vital resource to consumers in communities around the nation — to collapse.
Instead, hospitals will be much better served if they look to reinvent themselves proactively, rather than wait for more external catalysts — whether in business or government — to disrupt them by force. Delaying the inevitable only undermines the opportunities hospitals currently have for profitable, self-induced disruption.
Site-neutral payments are a chance for these organizations to hit the ‘reset’ button on their business models and actively redefine their role amid a shifting healthcare landscape. All the time, money and energy required to resolve these issues in court will further deplete these hospitals — and the taxpayer-funded CMS — of resources that could be better spent delivering value to consumers.
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Dr. Rita Numerof is the co-founder and President of Numerof. Her dedication, leadership, and passion have guided Numerof into its third decade of continuous growth and success.
From the firm’s inception, Rita has focused on developing new business models for companies in industries undergoing major market changes. Her work has spanned industries that are critical to global economic growth – financial services, healthcare delivery, pharmaceuticals, medical devices, telecommunications, and major industrial manufacturing. Bringing experience, style, and boundless energy, Rita has applied her expertise to help organizations create and execute successful new strategies in the face of fundamental market shifts.
Rita has a deep understanding of the challenges executives face in sustaining growth and profitability in increasingly fluid markets. As a result, she’s become a trusted advisor to senior management teams across a wide range of leading companies. Her cross-industry perspective, combined with her expertise in executing strategy and optimizing corporate performance are the basis for objective counsel that leading executives rely on.
Rita served on the board of directors for H.D. Smith, one of the largest medical products distributors, through its acquisition by AmerisourceBergen in January 2018. She is a board member of Jazz St. Louis, and a member of WBL (Women Business Leaders of the U.S. Healthcare Industry) and the Saint Louis Forum.
Dr. Numerof graduated magna cum laude from the Honors College, Syracuse University and received her PhD from Bryn Mawr College. She is widely published in business journals, has authored six books and serves as an adjunct faculty member of the Olin School of Business at Washington University in St. Louis.
