Stay ahead of the latest regulatory shifts and healthcare breaking news with Headlines from the Hill.
In this month’s edition you will find:
- Mergers and Acquisitions: How aligning with a larger health system can offer a lifeline for local hospitals.
- Cybersecurity: New bill will help smaller hospitals access critical resources.
- Medicaid coverage: Nationwide federal funding minimum for DSH hospitals.
- Wage index adjustment: Comments on IPPS Final Rule.
Mergers and Acquisitions: How aligning with a larger health system can offer a lifeline for local hospitals.
The Coalition to Strengthen America’s Healthcare released a new report coinciding with National Rural Health Day. The report finds hospital integration can offer small rural hospitals more financial security and resources, preserving patients’ access to care in rural areas. In addition to helping preserve access to care, integration can also benefit patients and communities by addressing staffing shortages, providing logistical support, standardizing care protocols that improve patient health outcomes, and updating technology and spurring innovation that enhances quality of care and reduces costs.
Last month, the Coalition released an analysis by KNG Health Consulting, an independent health economics and policy consulting firm, confirming hospitals and health systems provide access to around-the-clock emergency and specialty care that other providers typically cannot offer, making them indispensable, crucial access points for care. The report finds hospital integration can offer small rural hospitals more financial security and resources, preserving patients’ access to care in rural areas.
Key takeaways from the report include:
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- Aligning with a larger health system can offer a lifeline for rural hospitals that can protect patients’ access to critical care around the clock.
- A majority (55%) of rural hospitals that closed between 2011 and 2021 were standalone hospitals that lacked the support of a larger hospital system.
- Hospital finances can stabilize and improve after aligning with a system. In fact, 1 in 3 hospitals that were at high risk of closure were no longer high-risk following merger or acquisition. Two in three hospitals that were at high risk of closure were no longer high-risk following affiliation.
- Combining or affiliating with hospital systems was most beneficial to hospitals at the greatest risk of closure due to financial challenges. 18% of hospitals that affiliated with, merged with, or were acquired by a larger hospital system had previously been at high risk of closure.
- Prior to merger or acquisition, rural hospitals saw average total margins of 1.8%, which rose to 2.2% following merger or acquisition. Prior to affiliation, rural hospitals saw average total margins of 1.5%, compared to 2.3% post-affiliation.
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Cybersecurity: New bill will help smaller hospitals access critical resources.
A bipartisan group of senators, including Senate HELP Ranking Member Bill Cassidy (R-LA), Senate Intelligence Chair Mark Warner (D-VA), and Sens. John Cornyn (R-TX) and Maggie Hassan (D-NH), introduced the Health Care Cybersecurity and Resiliency Act of 2024.
This new bill is intended to strengthen federal coordination on healthcare cybersecurity and provide smaller hospitals with the resources needed to defend against cyber threats. The legislation builds on work from the senators’ health cybersecurity working group, launched last year. While the bill's future remains uncertain, the four sponsors are expected to continue advancing it in the next Congress.
Key provisions of the bill include:
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- Federal grants: Authorizes HHS to issue grants to health sector entities, including hospitals, to bolster their cybersecurity capabilities.
- Incident response plan: Mandates HHS to develop and implement a cybersecurity incident response plan within one year of the bill’s passage.
- Required cybersecurity standards: Requires HHS update HIPAA regulations to ensure HIPAA-covered entities use modern, up-to-date cybersecurity practices (e.g., multifactor authentication, encryption, audits including penetration testing.)
- Best practices for rural health entities: Requires HHS to issue guidance for rural entities on best practices for cybersecurity breach prevention, resilience, and coordination with federal agencies.
- Establishes guidelines to help rural health entities adopt effective cybersecurity measures.
- Enhanced coordination: Improves collaboration between HHS and the Cybersecurity and Infrastructure Security Agency (CISA) in addressing cyberattacks on healthcare entities.
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Medicaid Coverage: Nationwide federal funding minimum for DSH hospitals.
U.S. Senator John Barrasso (R-WY) recently introduced bipartisan legislation - The Delivering Support for Hospitals Act. This will help secure increased federal support for hospitals that care for a large number of Medicaid and uninsured patients, also known as disproportionate share hospitals (DSH).
What are DSH Hospitals?
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- DSH hospitals serve a large number of low-income and uninsured patients.
- They often operate in underserved communities with limited access to healthcare resources.
- These hospitals incur substantial costs due to providing care to patients who are unable to pay, leading to significant financial strain.
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The Issue:
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- Current federal funding mechanisms for DSH hospitals can be inconsistent and inadequate.
- This can lead to underfunding for hospitals serving the most vulnerable populations, potentially jeopardizing their ability to provide essential healthcare services.
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The DSH Act's proposed solution:
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- Establish a Nationwide Funding Minimum: The core objective is to create a minimum level of federal funding that all eligible DSH hospitals would receive.
- "Fair Share" of Funding: This minimum would ensure that DSH hospitals receive a consistent and adequate portion of federal funding, recognizing the unique challenges they face in serving their communities.
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Wage index adjustment: Comments on IPPS Final Rule.
On September 30, CMS released an interim final rule with a comment removing its policy of providing a wage index adjustment for hospitals in the lowest quartile of hospital wage indexes. The change, which went into effect on October 1, was CMS’ response to a legal challenge to the policy of increasing wage indexes for these hospitals in a budget-neutral manner. The legal decision in Bridgeport v Becerra was in favor of the plaintiff hospitals that were hurt by the lower budget neutrality adjustment used to pay for the low wage policy.
CMS proposed to continue to apply a 5% cap on drops in hospital wage index values from FY 2024 to FY 2025 – including for hospitals losing more than 5% in payments because of the reversal of the low wage policy. Low-wage hospitals, often rural, will see their wage index reduced compared to the final rule published on August 1, 2024.
On behalf of its members, FAH submitted a letter supporting the new money approach for applying the 5% cap on wage index reductions due to the loss of the low wage policy. The letter also urged CMS not to propose future recoupment from hospitals that received the low wage index adjustment in FYs 2020 through 2024. The letter challenges CMS’ legal authority to apply such a recoupment and highlights the financial hardship this would create for low-wage index hospitals.
