During the three weeks both chambers of Congress are in session in September, they are expected to pass a continuing resolution to fund the federal government for a short period of time.1 Both chambers adjourn on September 30 to finish campaigning and are not back in session until November 12 (one week after the election), when efforts to pass a federal fiscal year (FY) 2025 budget will begin in earnest.
This year’s budget process will have key implications for healthcare organizations. Despite differences between the parties, there are areas of agreement and thus potential for action in a divided Congress. As with everything in Washington, D.C., cost will be the rate-limiting factor for what can be passed. Therefore, the need to offset some (or all) of the cost of annual “extenders” and other healthcare policy changes exposes some organizations to the risk of payment cuts.
Below is an overview of issues on Capitol Hill to watch closely this fall, broken down by impact on provider finances and prospects for passage as they are understood in late summer.
Positive Impact for Providers, Likely to Occur: Annual “Extenders”
The Medicaid Disproportionate Share Hospital (DSH) cut moratorium, Medicare Dependent Hospital (MDH) program, expanded Low Volume Adjustment (LVA) qualifying criteria, and community health center (CHC) funding all expire on December 31, 2024. Each of these programs enjoys bipartisan/bicameral support and is likely to be extended. Congress has repeatedly delayed the Medicaid DSH cuts and extended CHC funding and the MDH and LVA programs in prior years. While it is likely Congress will do so again, provider organizations should prepare for a period of prolonged uncertainty, which will complicate budgeting and planning for impacted organizations. Given the complexity of negotiating an omnibus and depending on the post-election political landscape, it is possible Congress passes multiple short extensions while the federal FY 2025 budget is under negotiation.
Uncertain Impact for Providers, Likely to Occur: Medicare Physician Conversion Factor
Congress, as it has in prior years, will likely provide some relief from the -2.8% update to the Medicare Physician Fee Schedule (PFS) conversion factor CMS proposed.
Any increase in the conversion factor would increase Medicare reimbursement for physicians and providers paid under the PFS. However, this could negatively impact some healthcare organizations if the cost of the increase is offset with a reduction in payments for hospitals, e.g., expansion of site neutral policies discussed below, or other provider types.
Interest is growing in a longer-term fix that includes a more substantial annual inflation adjustment and attempts to address issues with the Quality Payment Program. However, given the cost and complexity of a larger overhaul of the PFS, more policy work needs to be done before a solution is ready for legislation.
Uncertain Impact for Providers, Likelihood Uncertain: 340B
Multiple bills related to the 340B Drug Pricing Program are under development. These range from Rep. Matsui’s H.R.7635 – The340B PATIENTS Act of 2024, which would clarify that manufacturers must provide the discount when covered drugs are dispensed from contract pharmacies, to the Senate “Gang of Six” 340B SUSTAIN Act “discussion draft,” which—among other things—would require dispensing in contract pharmacies but could potentially redefine what a patient is, to Rep. Bucshon’s H.R.8574 – 340B ACCESS Act, which includes new eligibility requirements that would eliminate hospitals from the program.
Rep. Matsui’s and Rep. Bucshon’s bills stand at opposite ends of the spectrum regarding the impact on hospitals. Legislative action likely depends on whether Congress can identify a middle-ground approach. However, additional scrutiny in the press of issues related to access to financial assistance, self-pay collection processes, or use of the discount could impede 340B hospitals’ efforts to protect the program from changes that limit access to the 340B discount or how that discount may be used.
Negative Impact for Providers, Likelihood Uncertain
Legislation in this area focuses on hospital site neutral payments and price transparency. Those advocating for these policies are positioning the changes as actions Congress can take to make healthcare more affordable for consumers.
- Off-Campus Hospital Outpatient Department (HOPD) Site Neutral (SN) Payments: Proposals range from making drug administration in off-campus provider-based HOPDs SN to eliminating the provision exempting off-campus HOPDs that existed prior to passage of Section 603 of the Bipartisan Budget Act of 2015 from the reduction. The American Hospital Association (AHA) and other stakeholders staved off action last year by pointing out that any expansion of SN policies would negatively impact access to care at rural and safety net providers. However, now some SN advocates are pushing a proposal that carves these types of hospitals out of an expansion of SN policies. Legislative efforts will again likely focus on discrete services instead of a broader expansion. The greater the need for savings to pay for the “extenders,” the harder it may be to prevent these changes, particularly if the beneficiaries of the extenders have been carved out of the SN policy expansion.
- Codifying Hospital Price Transparency Requirements & Expanding CMS Enforcement: Despite the low number of hospitals CMS penalized for noncompliance with the hospital price transparency requirements, there is a belief on both sides of the aisle that many hospitals are noncompliant. However, only 15 hospitals have been assessed civil monetary penalties (CMPs) for noncompliance, and of those, four CMPs are under review.
AHA and other stakeholders were able to prevent language codifying the existing requirements and requiring more aggressive enforcement by CMS in last year’s omnibus. However, groups including Patient Rights Advocate (PRA) and Arnold Ventures continue to lobby Congress for these changes. Their success may depend on early reports of hospital compliance with the new price transparency regulations that became effective on July 1, 2024. The hospital community should anticipate a PRA report alleging high levels of noncompliance late this fall.
What Healthcare Organizations Can Do
Healthcare organizations can take several steps to prepare for what will likely be a turbulent end to the 118th Congress.
- Short-Term – Congressional Engagement: Healthcare organizations should work closely with their state and federal associations to engage their senators and congressional representatives on these issues, conveying the impact potential legislative changes will have on operations and access to care.
- Short-Term – Healthcare Operations: Hospitals should be prepared to demonstrate compliance with price transparency requirements. Further, 340B hospitals in particular may want to review their financial assistance (FA) policies and revenue cycle processes to determine whether patients who qualify for FA discounts are receiving them.
- Mid-to-Long-Term – Healthcare Finance & Operations: The potentially positive legislative “changes” discussed above are delays of scheduled reductions in payments or extensions of existing funding for key programs expiring. New, increased funding through Medicare, Medicaid, or other federal programs benefiting a large cross section of healthcare organizations is unlikely. Therefore, healthcare organizations should look for opportunities to improve margins in the revenue cycle, reimbursement, and through operational excellence.
Our healthcare professionals at Forvis Mazars are committed to helping healthcare organizations understand and adapt to the impact of evolving federal policies. If you have questions about upcoming policy changes and how they may affect your organization, please reach out to a professional on our team.
- 1The continuing resolution would be expected to end sometime in late November/early December or extend into the next Congress.