A Senate panel tackled administrative spending in healthcare during a hearing July 31, the third in a series of hearings focused on reducing healthcare costs.
The Senate Committee on Health, Education, Labor and Pensions heard from economists and industry executives on the issue, including Becky Hultberg, president and CEO of the Alaska State Hospital and Nursing Home Association, and Matt Eyles, president and CEO of America's Health Insurance Plans.
Here are five key takeaways from their testimony:
1. Administrative costs put an outsized burden on smaller hospitals. An average 160-bed community hospital spends an estimated $7.5 million per year on regulatory compliance and dedicates 59 staff members to that area, according to Ms. Hultberg. "The issue of administrative burden comes into sharp focus in rural America. The volume of regulation requires scale to implement and rural areas lack scale," she said. "The opportunity cost of regulatory burden for rural communities may be the loss of services."
2. Medicare Conditions of Participation and conditions for other accrediting bodies need to be streamlined. Hospitals spend roughly $3.1 million annually on administrative compliance with conditions of participation, according to Ms. Hultberg's testimony. Collaborating between entities to streamline these conditions would help reduce the administrative burden on hospitals. Meanwhile, CMS should not add more CoPs, as was proposed in the fiscal year 2019 inpatient rule to promote interoperability of EHRs. Ms. Hultberg urged the agency to instead recognize and address issues directly.
3. The Anti-Kickback Statute stands in the way of value-based care. Ms. Hultberg urged Congress to create a safe harbor to allow more flexibility for the clinical integration arrangements needed to meaningfully create a value-based model of care.
4. Mr. Eyles defended some administrative activities, such as care management and fraud prevention, and noted they do not account for the largest portion of healthcare spending. Based on Milliman-AHIP research included in his written testimony, only 7 cents of every premium dollar go to administration. "The vast majority of every healthcare dollar goes directly to pay for medical treatments and services; the rest largely funds programs and services that improve health, reduce short- and long-term costs and increase healthcare choices," he said at the hearing.
5. Mr. Eyles called for more transparency around the fee charged to payers offering plans on the federal exchange. Payers are charged a 3.5 percent fee, which has remained stable despite reduced efforts by CMS to support healthcare.gov, market it, educate patients and conduct outreach, according to his testimony. He called for more transparency into how much money is being collected and what CMS is doing with the funds.
For more, watch the full hearing here.
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