FAH sees hospitals losing under Tricare shift

From Modern Healthcare:

Roughly 3,700 hospitals nationwide could lose more than $2.5 billion over the next five years under a new federal requirement that moves the military’s healthcare system to a payment model similar to Medicare’s, according to industry estimates from the Federation of American Hospitals.

Under a final rule issued Monday, the Defense Department said it would transition its Tricare program to more closely match the Medicare hospital outpatient prospective-payment system “to the extent possible.” The transition, required by law, would cut hospital outpatient payments $458 million in the first year of operation, according to a regulatory impact analysis that was included in the final rule. That cut, however, is significantly higher than what the department indicated in its proposed rule issued in April.

But hospital groups have called that estimate drastically low and said that higher transitional payments that Defense proposed covered only two services—emergency room and clinic visits. They want to see more services covered.

Tricare, which gives members of the military and their dependents healthcare coverage similar to private insurance coverage, transitioned physician payments to the Medicare fee schedule in the 1990s, but did so in a way that had less of a financial impact on providers. Under the new rule, hospitals are concerned that the monetary hit would be more immediate and only worsen while the changes are phased in.