MedPAC calls for 'site-neutral' payments

Commission also pushes for more bundled payments in annual report

The Medicare Payment Advisory Commission (MedPAC) on Friday outlined several recommendations for the Medicare program, including a policy that would equalize payment rates for evaluation and management visits provided inside or outside a hospital.

According to MedPAC's annual June report to Congress, new policies for outpatient payment—as well as other fixes—would help address Medicare's overall spending growth and a wide variance in outpatient therapy spending nationwide. Some of these policy changes were first proposed by MedPAC in March.

'Site-neutral' payments

In its report, MedPAC reiterated its recommendation that Medicare implement "site-neutral" policies that would equalize payment rates for evaluation and management visits in a hospital outpatient setting to those of free-standing physician offices. Beneficiaries would cumulatively save about $800 million annually under such policies.

Specifically, MedPAC identified 66 outpatient service payments—including three groups of cardiac imaging services—for which equalizing reimbursement rates would save $900 million annually.

The report also identified 12 groups of services commonly performed in ambulatory surgical centers (ASCs) that would generate about $600 million in annual savings if outpatient hospital payment rates are lowered to the level of ASCs.

The reports stated that such payment variations "urgently need to be addressed because many ambulatory services have been migrating from physicians' offices to the usually higher-paid outpatient department setting, as hospital employment of physicians has increased."

However, the panel expressed some concern that the policy changes could cut access to physician services for low-income patients, noting that a "stop-loss policy" could protect such patients by limiting hospitals' losses of Medicare revenue.

Bundled payments

The report also recommended bundling payments as a way to reduce the variance in Medicare rates for four post-acute care settings:

  • Skilled nursing facilities;
  • Home health care;
  • Inpatient rehabilitation hospitals; and
  • Long-term care hospitals.
  • Four lessons for succeeding under bundled payments: Learn how Crimson Continuum of Care can help your organization achieve success under bundled payments.

According to the report, bundled payments would require hospitals and post-acute care providers to coordinate patient treatment, which would give providers an incentive "to coordinate care and provide only clinically necessary services rather than furnishing more services to generate revenue."

Hospital readmission policy

The MedPAC report also offers recommendations on Medicare's hospital readmission policy, which some critics argue unfairly penalizes hospitals with a disproportionate share of low-income patients.

CMS in October 2012 implemented the Hospital Readmissions Reductions Program, which allows the agency to withhold up to 1% of regular reimbursements for hospitals with excess 30-day reamdmissions. The penalty will increase to 3% by 2015 and it is likely to be expanded to include readmissions for other medical conditions.

In its report, MedPAC—which helped develop the readmission penalties program—acknowledged that the policy contains some "shortcomings." It recommended that Medicare compare hospitals' readmission rates with peer hospitals that treat comparable numbers of low-income beneficiaries. The commission also proposed setting annual target readmission rates for hospitals and exempting those that do not receive penalties.

However, Medicare officials have noted any changes to the readmissions program could be difficult because of deep partisan divides over the Affordable Care Act.

Physician payments

The report estimated that physician Medicare payments would be cut by 24.4% on Jan. 1 under the sustainable growth rate formula.

MedPAC proposed a geographic adjustment to physician payments to account for the "cost of living" variations nationwide. The report stated, "The adjustment should reflect geographic differences in labor costs per unit of output across markets for physicians and other health professionals." Further, it recommends eliminating geographic payment adjustments that keep rates from going below a certain level (Pear, New York Times, 6/17; Daly, Modern Healthcare, 6/17 [subscription required]; Reichard, CQ HealthBeat, 6/14 [subscription required]; Rau, Kaiser Health News/Washington Post, 6/14).

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