The Patient Access and Medicare Protection Act, which was recently passed, will hold Medicare reimbursement rates steady for freestanding radiation oncology centers. Additionally, two providers listed as B3 stable, 21st Century Oncology and Vantage Oncology, will see their 2016 rates hold steady for 2017-18, according to a report from Moody's Investor Service.
While a scheduled 2 percent reduction in the reimbursement rate will be implemented next year, the Centers for Medicare and Medicaid Services' ability to cut rates for radiation oncology treatments in 2017-18 will be eliminated. The bill is expected to be signed into law by President Obama.
Moody's analyst Todd Robinson said the elimination of CMS's ability to cut rates quashes uncertainty around future Medicare reimbursement rate reductions.
"Having rates flat … is much better than we were expecting," said Robinson. "Now (21st Century and Vantage) can focus on their business. It's a big impact."
Since 40 percent of each company's respective revenue comes from Medicare, Moody's Senior Vice President Dean Diaz said the flat reimbursement scenario comes as an unexpected boon to those outfits. Both 21st Century and Vantage have been struggling to generate positive cash flow. That restricted their financial flexibility within their B3 stable ratings. According to the Moody's report, the companies should be able to increase profitability, as both are continuing to implement cost-cutting initiatives. Robinson said the bill also steers radiation oncology toward more of a bundled payment model.
"The healthcare industry in general is moving toward a bundled payment model -- you pay based on the episode," he said. "It's a cost-cutting initiative. This bill pushes radiation oncology towards that, but we don't know the end result, how it's going to affect those businesses. Down the road, hopefully there's a little more clarity there."
Without the legislation, Moody's had expected that reimbursement would have been reduced in a number of different areas: increases in the equipment utilization rate, for one, as well as a proposal to treat radiation vaults as an indirect cost as opposed to a direct cost. CMS has also proposed splitting the billing code for Intensity Modulated Radiation Therapy into two separate codes for "simple" and "complex" treatments, which also would have affected rates.
With a flick of the president's pen that all changes, and Robinson expects both organizations studied to benefit financially.
"It places them more comfortable in that 'B3' stable," he said. "My thought is that they've already done a lot of the easier cost cutting, and now all the low-hanging fruit is gone. So this definitely helps."
Twitter: @JELagasse