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The potential impact of the Tom Price nomination as HHS Secretary [PODCAST]

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In this episode, Jim Hoffman, Chief Operating Officer at BESLER Consulting, discusses the potential impact that Tom Price could have on healthcare policy as head of The Department of Health and Human Services.

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In this episode, we discuss:

  • Policies the incoming Secretary could alter on day one at his own discretion.
  • Potential changes to mandatory bundled payment programs.
  • Tom Price’s recent comments around CMMI.
  • How the rollback of the ACA could affect reimbursement to hospitals in the short term and over the long run.
  • Recent comments by trade organizations with respect to the nomination.
  • How quality measurement might play a role in HHS’ strategy going forward.

Michael Passanante: Hi, this is Mike Passanante. Welcome back to the Hospital Finance Podcast. Today, I’m joined by Jim Hoffman. Jim is the Chief Operating Officer here at BESLER. And he’s joined us to discuss some of the potential implications of Rep. Tom Price’s nomination as Secretary of Health and Human Services.

Jim, welcome to the podcast.

Jim Hoffman: Thanks, Mike.

Mike: So Jim, right off the bat, what do you think about President-Elect Donald Trump’s choice of Rep. Tom Price to lead HHS?

Jim: I think he’s an interesting choice. He was an orthopedic surgeon for 20 years. He ran the orthopedic surgery department of a hospital. So he’s got real world provider perspectives.

He also comes from a line of physicians. Both his father and his grandfather were doctors. And he said he got into politics because bureaucrats with no medical training were dictating how he could practice medicine.

And then, when he got to be the Chairman of the Congressional Budget Committee, he definitely knows exactly how to get major legislation like a replacement for ObamaCare passed. He’s got a lot of contacts in Congress. And he knows how things work.

Also, he actually has a plan, not just rhetoric around repealing and replacing ObamaCare. Not everybody is going to like his plan or his positions on various issues, but I think it’s really hard to argue that he’s not well qualified.

Since the Democrat, since the Senate changed the rules several years ago to eliminate filibusters for executive nominations other than the Supreme Court, he’s probably not going to be any problem being confirmed from January.

Mike: So, if he is confirmed and he takes that chair, what are some of the things that the incoming secretary could do on day one at his own discretion?

Jim: Well, HHS is a really huge department and the Secretary has a lot of power. Besides the functions that we focus on in healthcare finance like CMS and the Office of the National Coordinator for Healthcare IT, HHS also includes things like the Food & Drug Administration, the Centers for Disease Control and the National Institutes of Health.

It’s got a budget of over a trillion dollars a year. So a lot of the power that he’ll have comes from how that money is spent.

And a lot of that also is related to how grants are made and some of those other organizations that I just mentioned. And that could have a long-term impact on the types of research that gets carried out and the medical innovations that come for years. So, he’s got a lot of power there.

He could also immediately make certain changes to programs in the Center for Medicare and Medicaid Innovation that was set up under the Affordable Care Act. And also, a lot of ObamaCare is controlled through rule-making instead of legislation. So, the Secretary could, for example, roll back the mandatory coverage of contraceptives under ObamaCare.

Also, the Secretary has control over Medicaid Program Waivers. And the choice for the CMS administrator which came out at the same time, Seema Verma, has a lot of experience with those. For example, she helped to design a new program in Kentucky that’s under review by CMS right now. And that would require Medicaid recipients to hold a job.

More conservative programs like this would probably get a lot quicker approval under Tom Price. And those are the kinds of things that he could do right away.

Mike: Jim, what do you know about Tom Price’s view on CMMI?

Jim: Well, the Center for Medicare and Medicaid Innovation was set up under ObamaCare to test new payment programs with the idea that they could save money while they either maintained or hopefully improved quality. The CMMI has a big budget. It’s $10 billion a decade for as long as ObamaCare is in effect.

Programs like ACO’s and bundled payment for care initiative have come out of the work that CMMI does. But they recently rolled out several mandatory payment models such as CJR and a new Part B Prescription Program.

And so, a few months ago, when it probably looked like Hillary Clinton would win the election, Tom Price was the lead signer on a letter to CMS urging them to stop any current or planned mandatory payment programs being done by CMMI. He said CMS was overstepping its authority and it hadn’t consulted the affected stakeholders appropriately and was negatively impacting patient care and treatment.

Now, it’s going to be interesting to see what happens I think. CMMI is projected by the CBO to ultimately save billions of dollars for CMS. So that would seem to align with Republican goals of smaller government. And I would think that the power to implement, whatever his vision of healthcare innovation is, will be pretty strong at this point too.

Mike: Jim, what do you think Tom Price’s view will be towards continuing the mandatory bundled payment programs like CJR? Will he be inclined to halt them right away or do you think he’ll let them play out for a while?

Jim: Well, I think the fact that CJR focuses on hip-and-knee replacements and Tom Price was an orthopedic surgeon probably doesn’t help the outlook for that program very much.

When you look at the way CMMI programs are set up, the Secretary has the power to select the models that they want to test and to evaluate their performance. The Secretary is actually required to terminate or modify a model and can do it immediately if it’s not determined to be meeting the financial or quality goals that CMMI has.

And there are certain requirements as to how that evaluation of the program works. But at the same time, there’s also specific language in the legislation that created CMMI that precludes the administrative or judicial review of the Secretary’s choice of model, evaluation of the model performance or the decisions to terminate a model.

I’m not a lawyer, but it seems to me that, if he wanted to, he could terminate CJR on day one. But it remains to be seen if he’ll want to do that. CJR alone is expected to save CMS $350 million over its 5-year program period.

I do think though that there’s a really good chance that the expansion of CJR and the addition of the new cardiac bundled payments that CMS proposed back in July will be on hold for the foreseeable future.

Mike: If the ACA is rolled back, how could that affect reimbursement to hospitals in the short-term and over the long run?

Jim: I think most of the impact is going to be in the long run. Even with the Better Way Plan that Paul Ryan is proposing as his way of replacing ObamaCare (and that program includes a lot of input from Tom Price), the idea is that there’d still need to be a long transition plan to let people who have gotten coverage under ObamaCare move to alternatives that would be eventually set up.

But long-term, if you look at a repeal of ObamaCare, some of the major impacts could be things like if Medicaid expansion was to be undone, then a substantial portion of those patients that are now covered and were newly covered under ObamaCare could become charity care again likely with lower reimbursement overall and higher cost to hospitals.

The healthcare exchanges would essentially disappear which could lead to more uninsured patients. And the Republican plans would, over time, replace Medicare with tax credits which could substantially increase Medicare bed debt.

And then the transition that we’ve seen under ObamaCare of the disproportionate share payments to more of an uncompensated care pool program, those could be rolled back. And depending on the hospital, they could either do better or worse depending on how they did under the old DSH formulas.

Mike: Jim, many trade groups, including the American Hospital Association, have praised Tom Price as the HHS pick. In what you’ve seen, what do their comments have in common and what might this pick portend for hospitals?

Jim: Well, he’s definitely gotten industry support from hospital and physician groups. Both the AHA and the AMA have strongly endorsed him. But some of the industry groups, the ones more related to post-acute care providers, they’ve got more mixed feelings I think.

On the one hand, nursing homes have felt a lot of pressure from hospitals that are CJR participants. And if Tom Price was going to eliminate CJR, they’d probably welcome that change. But on the other hand, home health agencies have probably, on the whole, done better under CJR, so they’d probably prefer not to see that program go away.

But I think it’s interesting because when you look at hospitals, they’ve got the potential to do worse in certain ways under what’s been proposed to replace ObamaCare. But I think the support that you’ve seen comes out of a general feeling that Tom Price is very well qualified. And based on his experience, he’ll generally have their best interest in mind as he develops policy.

Mike: As a physician, Tom Price presumably has knowledge of how physicians work and get paid. How does MACRA line up with his thinking? And do you think there may be some changes related to physician compensation?

Jim: Well, not surprisingly, he’s been an advocate for physician issues during his time in Congress. He did vote to pass MACRA. But he did have some criticisms of the proposed rule when it came out.

He was actually successful in getting some of the changes made related to things like shortening the meaningful use reporting periods and creating more emphasis on physician education.

And he was also a driving force a few years ago behind-the-scenes to delay the ICD-10 implementation. And his replacement under ObamaCare also includes changes to make it more difficult for patients to sue providers.

Also, he wants it to make it easier for physician groups to negotiate with payers without being concerned about anti-trust issues. So, I think, overall, it’s safe to say that he’s going to be looking at ways to improve the delivery and payment of care by physicians both directly and indirectly.

Mike: Overall, do you think that the emphasis on paying for quality will still be part of HHS’ larger approach going forward under Tom Price?

Jim: I think it definitely will be. He’s been supportive of that concept during his time in Congress. He’s just been opposed to what he’s seen as the excess of bureaucracy that’s come along with it. The common goals of all these programs are to save money and improve patient care, so I think it’s hard to argue that those aren’t good goals.

Mike: Jim, thanks for stopping by and helping us understand more about some of the implications that could be out there around Tom Price’s nominations as HHS Secretary.

Jim: It’s my pleasure, Mike. I think it’s definitely going to be an interesting 2017.

Mike: I would agree. Thanks, Jim.

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