The following is an update on the most prominent proposals and events of significance to strategists in medical group, hospital, and post-acute care settings.


The June 24, 2019 White House Executive Order (EO), “Improving Price and Quality Transparency in American Healthcare to Put Patients First,” set in motion price transparency initiatives by the Department of Health and Human Services (HHS).3 On July 29, 2019, the Centers for Medicare and Medicaid Services (CMS) released three proposed payment programs to achieve the goals of reducing administrative burden, putting patients over paperwork, and increasing price transparency for patients. On November 15, HHS and CMS announced the final rule for hospital price transparency requiring details about underlying costs, prices, and negotiated reimbursement rates for 300 “shoppable services” to be implemented by all hospitals by January 2021.1 This legislation is in limbo pending a lawsuit filed December 4, 2019 by the American Hospital Association (AHA) and other litigants claiming the rule violates first amendment protections. The EO called for implementation by January 2021.4

KEY TAKEAWAY: Mandated price transparency for health insurers, hospitals, physicians’ services, and prescription drugs is popular among policymakers and in the general public. Action is likely, though constraints imposed in the courts will likely delay implementation and narrow the scope. The most disruptive impact will be required disclosure of business and contractual relationships between insurers and hospitals, physicians and hospitals, drug manufacturers and distributors, pharmacy benefits managers and health insurers, and others.


Public support for M4A appears to be slipping. Last month, the nonpartisan Committee for a Responsible Federal Budget released its analysis of possible ways to finance a universal, single-payer health plan.2 “By most estimates, Medicare for All would cost the federal government about $30 trillion over the next decade.” The report provided several funding options, including a 32 percent payroll tax, a 25 percent income surtax, a 42 percent value-added tax (VAT), a mandatory public premium averaging $7,500 per capita – the equivalent of $12,000 per individual not otherwise on public insurance, doubling all individual and corporate income tax rates, an 80 percent reduction in non-health federal spending, a 108 percent of gross domestic product (GDP) increase in the national debt, higher taxes on high earners, corporations, and the financial sector. Most estimates of Medicare for All find it would cost the federal government $25 trillion to $36 trillion over ten years, on top of the $16 trillion the federal government is already projected to spend on major health programs over the next decade.

KEY TAKEAWAY: M4A seems unlikely to pass, but alternatives that expand affordable coverage via a subsidized public option and/or early buy-in to Medicare are gaining traction. Private insurers will lobby for expansion of Medicare Advantage as the better option.


Effective January 1, 2019, off-campus hospital outpatient departments (HOPDs) were scheduled to be paid at the lower Physician Fee Schedule (PFS) rate equivalent, phased in over the course of two years. Reimbursement for hospital outpatient departments will be paid approximately 70% of the Outpatient Prospective Payment System (OPPS) rate for “clinic visit” services, which account for more than half of all services billed by hospitals. Hospitals were given a reprieve on its implementation after successfully winning a court challenge in September 2019. Nonetheless, HHS finalized its site neutral proposal as part of its 2020 outpatient pay rule.

KEY TAKEAWAY: It is likely expanded application of site-neutral payments will be authorized by the court and implemented by CMS. Planners should assume reimbursement at lower rates.


Last month, the Federation of American Hospitals (FAH) and the AHA released a study showing how 12 legislative Acts, combined with numerous regulatory changes, would reduce hospital funding by $252.6 billion between 2010 and 2029. The study suggests budget sequestration ($85.6 billion) and diagnosis code documentation ($85.7 billion) are the two most significant cuts. Other reductions noted in the report were Medicaid Disproportionate Share Hospital Payment reductions of $25.6 billion, off-campus provider-based department payment cuts of $23.7 billion, long-term care hospital cuts, $8.1 billion, post-acute care payment updates of $7.3 billion, and others.

KEY TAKEAWAY: Hospitals face heightened operating margin pressure as a result of expected Medicare budget cuts. Creating alternative revenue sources, expanding the scale and scope of services offered is essential to planning.


Support for legislation addressing “surprise medical bills” imposed on consumers who unknowingly face higher charges for use out of network (OON) providers appears likely. The House Ways and Means Committee is likely to advance a bill that limits OON to the mean, in-network rate, and an appeals process for providers. Action on surprise medical bills in the Senate might include a benchmark rate rather than a mean. that is to be determined.

KEY TAKEAWAY: Attention to surprise medical bills has prompted unflattering attention to hospitals, physicians, and private equity funds that benefit from surprise billings.


Reducing drug costs is a top priority for the administration and has bipartisan support. The mechanism whereby constraints may be imposed is unclear: gaining traction are price limits for certain classes of drugs linking allowable prices to their average wholesale price for specified drugs sold in other industrialized countries. Note: drug prices charged by drug manufacturers to wholesalers and distributors (aka ex-manufacturers prices) in the United States are 1.8 times higher than in other countries for the top drugs by total expenditures separately paid under Medicare Part B. Meanwhile, the President’s Executive Order (7/18/19) ordering drug manufacturers to disclose prices in their TV ads is in limbo: The District of Columbia ruled that HHS does not have the regulatory authority to require drug manufacturers disclose the cost of drugs in television commercials.

KEY TAKEAWAY: It is unlikely drug price legislation will pass this year. In all likelihood, states will play a more direct role through Medicaid purchases and requirements that price increases above 10 percent need approval (Maryland and other states) . These endeavors will face fierce opposition from manufacturers and distributors whose lobbying efforts are formidable.


DSH Payment Cuts: Continued negotiations around disproportionate share hospital (DSH) payment cuts and 340B eligibility. Delays are likely in action on both pending court reviews.

Medicaid block grants: Idaho will implement its voter-approved Medicaid expansion program January 1 and Republican Governors in Tennessee and Georgia are petitioning CMS for Medicaid block grants.

Louisiana politics: Lousiana re-elected Gov. John Bel Edwards defeated Eddie Rispone by defending the state’s Medicaid expansion. Louisiana is the only Deep South state to expand Medicaid under the Affordable Care Act.

Michigan Medicaid eligibility work requirement challenge: Michigan is the 5th state to face legal challenge to its 80-hour/month requirement.

Physician pay: Tension exists(?)between the physician-focused Payment Model Technical Advisory Committee charged with developing alternative pay models for physicians and CMS. The concern is centered uponwhether CMS will act on its recommendations.

Patient Experience (Px): Since 2008, patient experience has been a factor in reimbursement by Medicare. Watch for changes in how Px is defined and measured, and its usefulness in reimbursement by Medicare (HCAPS, et al).

Primary Care Models: CMS is expanding its alternative payment emphasis on primary care models that take downside risk. Private equity backed primary care models and retail juggernauts like CVS are betting primary care will be “America’s new front door”. It’s likely employers, private insurers and sponsors and managed Medicaid and Medicare Advantage plans will follow suit.

Digital Health, Interoperability and Connected Care: $11 billion has been invested in digital health solutions in 2019. Meanwhile, HIT investments face enormous interoperability challenges that could widen the gap between larger systems with digital prowess and those lacking.

On Demand Healthcare: The healthcare consumer is becoming more active in provider selection, more attentive to prices and costs, more welcoming of alternative providers and therapies and more responsive to convenience and positive personal experiences.

Senior Care: Social determinants, housing and food insecurity, Medicare and Medicaid payment, the transitioning of care from facilities to homes and emergent telehealth and virtual care models combine to make rural health and senior care a hotbed for innovation and regulatory scrutiny.

The Federal Budget: The government is currently operating under a Continuing Resolution to fund its agencies and programs. That CR expired on November 21. The expectation is a new CR will be passed that funds the government for another 90-120 days. Most programs will be unaffected, but some departments/agencies might be cautious about contracting with outside parties given uncertainty about their funding.

ERDMAN Analytics monitors these and other trends, incorporating insights into strategic healthcare planning, facility design and its project delivery framework. For more information, contact ERDMAN at


  1. Centers for Medicare & Medicaid Services. (July 29, 2019). “CY 2020 Medicare Hospital Outpatient Prospective Payment System and Ambulatory Surgical Center Payment System Proposed Rule (CMS-1717-P) [Fact sheet].”
  2. Committee for a Responsible Federal Budget. (Oct. 28, 2019). “Choices for financing Medicare for all: A preliminary analysis [Paper].”
  3. Exec. Order No. 13877 (2019). “Executive order on improving price and quality transparency in American healthcare to put patients first.”
  4. Wynne, B., LaRosa, J., and Cowey T. (Nov. 18, 2019). “A look inside the hospital transparency final rule.” Health Affairs Blog. DOI: 10.1377/hblog20191118.74200.
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