The Weakest Link
A hospital’s supply chain has proven in recent years to be susceptible to certain vulnerabilities. The COVID-19 event led to a shortage in personal protective equipment (PPE) and other items. A shortage in certain critical drugs took place a couple of years back due to a hurricane and resultant floods in the Carolinas. And then there is the general realization that America has become too dependent on medical products and pharmaceuticals from other nations. The thought here is this: do we really want to trust a rival or potentially hostile nation to manufacture and supply a large percentage of our medical supplies and drugs?
Given recent disruptions in the supply chain of many American medical facilities and realizing that there is a risk in relying so heavily on foreign players for these critical items, the Centers for Medicare and Medicaid Services (CMS) has published a notification that seeks to rectify what it sees as a weakness in the American medical supply chain.
Strengthening the Chain
In late January, CMS released an Advance Notice of Proposed Rulemaking (ANPRM) seeking public feedback on potential approaches to strengthening the American-made supply chain for PPE and essential medicines. “The ANPRM seeks comments on new avenues CMS may consider to promote domestic purchasing by hospitals that participate in the Medicare program.” This might include the potential creation of a new “Secure American Medical Supplies” designation for hospitals committed to American-made purchasing and streamlined payment approaches to help offset the resource costs of domestic product procurement.
So, basically the ANPRM is looking for feedback from hospitals and other stakeholders concerning the best strategies for cutting dependency on foreign medical supplies in favor of American-made products. As the ANPRM states: “CMS is seeking broad input on future supply chain policies to advance national security, strengthen domestic manufacturing capacity, improve care quality and support a more resilient health care system.”
Rethinking the Recommendations
Significantly, the American Hospital Association (AHA) has recently responded to the government’s call for input in this regard. The organization released a letter to CMS stating that “the AHA supports and shares the administration’s long-term goal of strengthening American manufacturing of PPE and essential medicines while reducing our nation’s reliance on sometimes volatile international sources.” However, this does not mean the AHA fully supports the government’s strategies on how to achieve this shared goal.
In their March 30 letter, the AHA responded to CMS’ suggestions for encouraging the increased use of domestical medical supplies by offering the following comments:
Make a public designation based on domestic procurement percentages voluntary. While CMS suggests that a “Secure American Medical Supplies” designation could potentially allow Medicare and other payers to recognize the additional costs associated with domestic procurement, it remains unclear whether such a designation would lead to higher payments from payers in amounts that would actually offset the higher costs of domestic PPE and essential medicines, as well as the administrative costs required to track and report data necessary to maintain such a designation.
Implement separate Medicare payments in a non-budget-neutral manner. To best incentivize hospitals to procure domestically made supplies and medicines, CMS should consider making payments for these medicines and supplies beyond just Medicare FFS patients. At a minimum, the AHA would urge CMS to consider payments to include at least all Medicare and Medicare Advantage beneficiaries.
Deprioritize the development of a structural measure in the IQR Program. The AHA believes that a structural measure in the IQR Program would be redundant with the designation that CMS is considering. It would not align well with the purpose and intent of the IQR Program and would add substantial compliance costs for hospitals. For these reasons, the AHA does not support the development or inclusion of a structural measure within the IQR Program regarding procurement of minimum percentages of PPE and essential medicines.
The AHA letter goes in to greater details on each of these points. To review those details, please click on the following link: AHA Comments on CMS' Policy Ideas for Fostering a More Resilient Supply Chain | AHA. To view the CMS press release on the ANPRM, please go to the following link: CMS Seeks Public Input on Strengthening Domestic Supply Chain for PPE, Essential Medicines | CMS.