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> The Inflation Reduction Act
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MONDAY REPORT

Hospitals Concerned About Effects & Costs of Delayed Care

As the fall approaches and the healthcare system gears up for the flu season and a possible resurgence of COVID-19 cases, hospitals are also grappling with the fact that individuals who delayed care during the pandemic are returning to care facilities with higher patient acuity.

Between 2019 and 2021, overall patient acuity, as measured by the average length of stay, was up nearly 10%, according to recent national data. And that length-of-stay trend has continued into 2022. Much of that can be attributed to the complex care needs that COVID-19 patients require. But non-COVID patients – including those that delayed care during the pandemic – are returning to hospitals in notably worse health as a result of the pandemic.

With increased acuity comes increases in labor, drug, and supply costs to hospitals and health systems.

Patients delayed their care and systems in some cases were required to curtail “elective” procedures due to the pandemic. But as the American Hospital Association noted in a recent white paper, “In most cases, procedures defined as ‘elective’ are not optional procedures or those performed solely at the behest of patients, as the term might suggest. In fact, elective procedures tend to be medically necessary and are broadly defined as any procedure that can be scheduled in advance. These can include procedures such as hernia repair, appendectomies and mastectomies – which, if prolonged, can lead to patients getting much sicker and requiring more intensive care.”

Due to the pandemic, routine screenings also decreased, which has the downstream effect of cancer diagnoses being delayed. A study from Strata Decision Technology cited in the AHA paper notes that the case mix index (a measure of severity in inpatient cases) was up for patients receiving mastectomies, appendectomies, and hysterectomies.

The rise in patient severity has required health systems to add more staff in a very challenging labor market. That too has raised costs to the healthcare system.

“[S]ignificant workforce shortages continue to exist across the country, leaving hospitals to turn to contract labor firms charging exorbitant rates to hospitals for critical staff like nurses and respiratory therapists to help care for these sicker patients,” the AHA notes. “According to June 2022 data Kaufman Hall, labor costs are up over 12% for hospitals from 2021.”

A recent MHA survey of hospitals showed that temporary staffing costs were $181 million annually at the start of the pandemic in FY2020, ballooned 81% to $328 million through all of FY21, and to date, as of March 31 or halfway through FY22, temporary R.N. staffing costs stand at $445 million.

MHA, along with the AHA, has been advocating in Washington for additional assistance from the federal government in recognition of the fact that patient acuity continues to rise as do the workforce challenges necessary to meet the rise, and inflation. Specifically, hospitals are seeking a halt to Medicare payment cuts to hospitals, extension of certain waivers granted during the pandemic to improve efficiency, and more oversight of commercial insurance policies such as denials of medically necessary care and excessive prior authorization hurdles.

The Inflation Reduction Act of 2022

On Tuesday, August 16, President Joe Biden signed the Inflation Reduction Act of 2022, legislation which came to his desk following a 51-50 Senate vote in a marathon, all-night session. The entire Massachusetts congressional delegation voted aye. The bill, as estimated by the Congressional Budget Office and the Joint Committee on Taxation, would generate more than $700 billion in revenue, and over $102 billion in deficit reduction.

Among the health-related provisions, the act will extend the Affordable Care Act marketplace premium assistance subsidies for three years, cap Medicare beneficiary out-of-pocket costs for insulin at $35 per month, cap Medicare Part D beneficiary out-of-pocket costs at $2,000 annually, and require Medicare to negotiate directly with manufacturers for the price of prescription drugs starting in 2023.

The drug negotiation process will be phased in initially starting with the 10 high-spend Medicare drugs, expanding by 15-20 drugs each year moving forward. The Secretary of Health & Human Services will establish a Maximum Fair Price (MFP) for Medicare beneficiaries. The MFP would not be made available to commercially insured patients. The MFP would apply in 340B settings unless the ceiling price is lower. Manufacturers will be required to pay Medicare a rebate for any drug whose price increases faster than the pace of inflation. For drugs where a manufacturer chooses not to engage in Medicare-required negotiation, a 95% excise tax would be placed on the sales of those drugs. Certain drugs will be exempted, including a drug that treats only one rare/orphan disease/condition, and for which the only indication (or indications) is for that disease/condition.

MassHealth Seeks Input on Social Determinants of Health

A component of payments to managed care entities operating in the MassHealth program is risk-adjusted to account for member acuity. And a component of risk-adjustments is to recognize the social determinants of health for specific populations being served. MassHealth has been using Social Determinants of Health Model 3.1 created by the UMass Chan Medical School. Components of that model have been enhanced recently, according to MassHealth, to take into account data relating to housing and “neighborhood-based predictors,” among other factors.

Last week, MassHealth issued a Request for Information seeking input on whether and how it could improve its managed care organization and accountable care organization risk adjustment model in the future, “with a specific focus on how to adjust for social determinants of health and alternative sources of data that would help inform member needs beyond medical diagnoses.”

Expect an Enhanced Booster Campaign this Fall

Plans continue for the U.S. to begin a COVID-19 booster campaign in September/October that focuses on providing vaccines targeting the predominant variants of the original virus.

The United Kingdom last week became the first government to approve a “bivalent” vaccine that targets the original strain of COVID-19 as well as the omicron variant.

In the U.S., vaccine manufacturers are focusing on providing shots against omicron subvariants – BA.4 and BA.5 – that are the predominant strains in the country. Those vaccines could be assessed by U.S. regulators – the CDC and FDA – as early as September.

When and if the vaccines are approved, it is still unclear who will get them. Currently, all adults who are 50 or older, and people who are 12 and older and are immunocompromised can receive a second booster. (Everyone can and should receive the regular course of vaccinations and a single booster.) In the fall, the variant-specific boosters could be made available to all people, or they could again first be made available to those of a certain age, followed by the rest of the population.

John LoDico, Editor