Mar. 19—Congress should cut hospital payments for 66 groups of services that are also provided outside hospitals, the Medicare Payment Advisory Commission (MedPAC) recently recommended.

The cuts urged in MedPAC’s recent annual report to Congress are part of its expanding effort to derive Medicare savings through so-called site-neutral payments, or paying providers the same amount for similar services provided in different settings. The initiative primarily affects hospitals, which charge more for similar services because their infrastructure costs are larger than physicians’ practices costs, for example.

The recommendation would reduce hospital payments for 66 groups of services—primarily imaging and tests—to levels equal to or closer to the rates paid to physicians and other healthcare providers.

“Basing the payment rate on the rate in the most efficient setting would save money for Medicare, reduce cost sharing for beneficiaries, and reduce the incentive to provide services in the higher-paid setting,” the report said about the rationale behind the recommended payment changes.

Hospital advocates have countered that the higher payments are needed to cover the higher infrastructure costs and additional costly services—such as emergency care—offered around the clock and in close proximity in hospitals.

The latest site-neutral recommendations followed previous MedPAC requests for Congress to cut Medicare’s evaluation and management payments in hospital settings to the amounts provided when such services are performed in physicians’ offices.  

The policy change aimed at hospitals came as MedPAC also recommended a 3.25 percent increase in overall Medicare payments for inpatient and outpatient hospitals. The recommendation followed MedPAC’s finding of a -5.4 percent Medicare margin in 2012 among 4,700 acute care hospitals.

Other Pay Changes

Other recommendations by MedPAC include no increase in 2015 fee-for-service payments for ambulatory surgical centers, outpatient dialysis, long term care hospitals, inpatient rehabilitation facilities, and hospices.

For skilled nursing facilities and home health agencies, MedPAC reiterated its previous recommendations that Congress approve a range of changes that would redistribute payments among providers with the aim of improving access for beneficiaries, lowering the base rate, and creating incentives to improve quality.

MedPAC repeated its longstanding call for Congress to repeal the sustainable growth rate formula, which determines Medicare pay rates for physicians, and replace it with a system that reduces the disparity in payments to primary care providers and specialists.

Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter @rdalyhealthcare.


Publication Date: Wednesday, March 19, 2014