Dec. 16—The Medicare Payment Advisory Commission recently approved recommendations for Congress to equalize payments for various services provided in different settings.

Medicare payment proposals, which will be included in MedPAC's March 2014 report to Congress, includes changes that would reduce hospital payment rates for a several services to the levels paid for the same services provided at physician’s offices.

The change is necessary, according to MedPAC members, not only to reduce the copayments due from beneficiaries for such services, but also to eliminate the incentive for hospitals to shift such services to the pricier inpatient setting.

The commission highlighted data from the Centers for Medicare &Medicaid Services (CMS) that show even as volume has generally shifted from inpatient to outpatient settings, high-cost services provided in both settings are shifting in the opposite direction. For instance, echocardiograms in 2012 dropped by 9 percent in freestanding offices and increased by 13 percent in hospital outpatient departments.

The equalizing of rates for 66 types of services would reduce acute hospital payments by about $1.1 billion annually, MedPAC concluded. Those reductions would follow previous MedPAC recommendations for a separate $1 billion in annual savings by equalizing evaluation and management payments.

Additional Payment Changes

Another proposal would save Medicare $2 billion in 2015 by cutting payments to long-term acute care hospitals for patients who spend fewer than eight days in an intensive-care or critical-care unit to the level paid to acute care hospitals. MedPAC proposed redistributing the savings from cutting long-term care hospital (LTCH) payments through a new outlier pool for chronically critically ill cases treated at inpatient prospective payment system hospitals.

Other draft recommendations would increase payment rates for the hospital inpatient and outpatient prospective payment systems by 3.2 percent in 2015.

The commission also considered a draft recommendation that would freeze Medicare payments to physicians in 2015 in place of the sustainable growth rate formula.

“The [American Hospital Association (AHA)] appreciates MedPAC’s recognition that Medicare payments to general acute-care hospitals are well below the costs of care, warranting a sizeable update to inpatient and outpatient payment rates,” Joanna Hiatt Kim, vice president of payment policy for the American Hospital Association, said in a written statement. “However, we are deeply disturbed by the commission’s draft recommendation to cut payments to 64 percent of LTCH cases; the discussion focused solely on payment rates, lacking any dialogue about the financial impact on LTCHs or, most importantly, potential consequences on beneficiary access to the high-quality, specialized care that LTCHs provide.”

Publication Date: Monday, December 16, 2013