Apr. 1—A 24 percent cut in Medicare physician payments scheduled to begin Tuesday was averted for another year under legislation Congress passed over opposition from many physician advocacy groups.

The Protecting Access to Medicare Act of 2014 cleared the Senate March 31, and President Barack Obama was expected to sign it into law. In addition to freezing Medicare physician pay rates at their current levels until April 2015, the bill would delay implementation of the ICD-10 codes until October 2015 and bar full enforcement of the controversial two-midnight hospital admissions rule until April 2015.    

The Senate’s 64-35 vote came over the objection of senators who favored another bill to fully repeal the sustainable growth rate (SGR) formula, which was created in 1997 to set physician pay rates at levels that limited Medicare’s spending growth. However, bipartisan SGR replacement legislation stalled over a partisan split on the method used to cover the bill’s $180 billion 10-year cost.

The legislation was passed over the objections of many physician groups, which pledged to oppose any more temporary SGR patches as part of an effort to enact permanent legislation. The organizations said the 17 temporary patches enacted to avert SGR have spawned anxiety and sometimes disrupted physician revenue. 

Hospital Changes

But some hospital organizations were more supportive of some components of the legislation, which included a range of policy changes for hospitals.

Among the largest change impacting hospitals was an unexpected one-year delay in the requirement that all Medicare providers switch to using ICD-10 codes by Oct. 1. The Obama administration had administratively delayed the switchover once before, but officials had repeatedly insisted in recent months that they would allow no more time. For instance, Centers for Medicare & Medicaid Services Administrator Marilyn Tavenner said at a February healthcare conference that the administration would grant no more delays.

The delay could benefit tardy providers but cost healthcare providers who have advanced far along in their ICD-10 preparations, according to a health policy expert.

“The big push and pull is between large organizations that have prepared for ICD-10 conversion and smaller ones—particularly specialty physician groups—that don't have dollars to focus exclusively on this ICD-10 conversion,” said Richard L. Gundling, vice president, healthcare financial practices for HFMA. “Many organizations have spent considerable amounts of resources, including investments in training staff and upgrading IT systems, to prepare for the conversion to ICD-10. Although a delay does allow additional time for transition, it does result in a loss of momentum and will require additional costs to prepare for the conversion again one year later.”

The bill also partially delayed enforcement of the new inpatient payment requirements for hospitals, known as the two-midnight rule.

Hospitals have raised many concerns about a lack of clarity in guidance issued about the new admissions policy, which replaces the use of medical necessity to decide on an inpatient admission.

Concerns about the financial impact of the new admissions policy included a March analysis by Moody’s Investors Service, which concluded the two-midnight rule could reduce hospital revenue by up to $4,000 per case.  

Additionally, the bill would extend to April 1, 2015, a range of so-called Medicare extenders also sought by hospital advocates:

  • The Medicare dependent hospital program 
  • Increased inpatient hospital payment adjustment for certain low-volume hospitals
  • Ambulance add-on payments
  • The work geographic price cost index floor
  • The therapy cap exceptions process 

Among the primary ways the bill covered the $15.8 billion cost of the one-year SGR patch was through extending scheduled Medicaid disproportionate share hospital payments for another year, through FY24.

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


Publication Date: Tuesday, April 01, 2014