CMS and MedPAC Guidelines and Trends

3 takeaways from the latest MedPAC policy meeting: future payment rates, telehealth coverage approaches and an overhaul of Medicare APMs

January 25, 2021 11:36 pm
  • At a meeting of the Medicare Payment Advisory Commission, commissioners supported a recommendation to disregard the COVID-19 pandemic as a factor in setting future hospital payment rates.
  • The menu of Medicare alternative payment models may need to be overhauled to support a more strategic approach to payment innovation.
  • Questions remain about how telehealth should be permanently expanded after the pandemic.

Discussions during the January public meeting of the Medicare Payment Advisory Commission (MedPAC) had implications for key areas of healthcare policy, including hospital payment updates, alternative payment models (APMs) and telehealth. MedPAC is an independent agency that advises Congress on issues affecting Medicare.

Here are three of the biggest takeaways from the Jan. 14-15 meeting.

1. The financial impact of the ongoing public health emergency won’t be reflected in future inpatient payment updates

A presentation by MedPAC staff analysts stated, “We find no evidence of widespread financial struggles at hospitals in 2020; however, the circumstances of individual hospitals may vary substantially.” Federal support totaling more than $70 billion was cited as a big factor in bolstering hospitals’ financial standing.

“We do not anticipate any long-term changes to the hospital landscape that will persist past the end of the public health emergency and therefore warrant inclusion in the annual update to hospital payment rates,” the analysts stated.

For FY22, Congress should increase the base Medicare payment rate for acute care hospitals by 2%, according to MedPAC’s recommendation. Along with a 0.5% statutory increase and 0.8% boost from the removal of quality-program penalties, the total increase would be 3.3%.

“Recall that there was a lower increase in 2019, and hospitals maintained their patient care margins,” said Alison Binkowski, MedPAC senior analyst. “Therefore, we believe that hospitals will be able to maintain or increase their margins in 2022 with the draft update.”

The increase for outpatient payments in FY22 would be 2% under the recommendation.

A few commission members weren’t sold on the idea that the lingering financial impact of the pandemic will be muted. Still, no commissioner opposed the policy recommendation.

Jonathan Perlin, MD, PhD, president of clinical services and chief medical officer with HCA Healthcare, said hospitals could take a hit this year because:

  • The 2% sequestration of Medicare payments is scheduled to be reinstated at the end of March.
  • If organizations haven’t repaid the Medicare advance payments they received near the start of the pandemic, they face a 25% garnishment that can increase to 50% during the 29-month repayment period.

“As these things converge, you could actually have tantamount to a 52% negative update against what we’re recommending,” Perlin said.

Another concern, several commissioners said, is a potential surge in labor costs stemming from a reduction in the supply of available clinicians after the pandemic.

2. The suite of Medicare APMs should be streamlined and standardized

Of the dozens of APMs implemented at the federal level over the last decade, only four met the spending and quality criteria that would allow them to be taken out of the pilot phase. Only one of those — the Pioneer ACO Model — required providers to take on financial risk. That model expired but provided lessons that have been incorporated in the Enhanced Track of the Medicare Shared Savings Program.

According to a presentation at the MedPAC meeting, barriers to better performance by APMs include:

  • Participating providers may still have incentives to maximize utilization of care delivery.
  • APM incentives may be hard for providers to understand.
  • Clinicians’ employment arrangements may shield them from APM incentives.

One policy solution, according to the presentation, would be to implement a smaller suite of coordinated models that support a clear set of strategic goals. Models in such a series would be designed to actively support one another instead of serving as one-off initiatives.

If the Center for Medicare & Medicaid Innovation (CMMI) is to be tasked with condensing the menu of APMs and implementing uniform standards for models, the value of such models from a provider perspective should be formally considered, said Bruce Pyenson, a commission member and principal and consulting actuary at Milliman, Inc.

“Many of the advanced alternative payment mechanisms are of immense value to the providers,” Pyenson said, noting that his observations are anecdotal. “CMS doesn’t get as much value as the providers do because they’re looking at it from a shared savings perspective.

“I think there’s enormous value in some of the behaviors and the ability to expand markets or to coordinate care. The value to the provider, and understanding that, is something that the assessments by CMMI have to get into.”

3. The telehealth expansion should continue but with guardrails

A looming question for Medicare is how to maintain the telehealth coverage expansion that was implemented during the pandemic. Such a decision could improve access to care while reducing costs relative to in-person visits, according to a presentation during the MedPAC meeting.

However, telehealth expansion under a fee-for-service system also could lead to increased healthcare utilization and spending, commissioners were told. Furthermore, telehealth has been implicated in several fraud cases.

Policy options include continuing to cover certain telehealth services, such as those providing care for chronic conditions. Additional services could be covered based on subsequent reviews. Payment rates likely would be lower than those for in-person services.

In the short term, CMS should pay for telehealth using the Medicare Physician Fee Schedule facility rate, according to the presentation. In the long term, data on the costs of providing telehealth services should be collected and used to set payment rates.

The following safeguards should be considered to protect the Medicare program and beneficiaries from unnecessary spending and potential fraud related to telehealth:

  • Applying additional scrutiny as needed to outlier clinicians
  • Requiring clinicians to provide an in-person visit before ordering costly equipment and lab tests
  • Prohibiting incident to billing for telehealth services provided by any clinician who can bill Medicare directly
  • Requiring clinicians who bill incident to services to provide direct supervision in person

Several commissioners wondered about the impact of allowing direct-to-consumer telehealth vendors to bill Medicare for services provided.

Such companies “have much lower costs than clinicians who work in an organization that provides brick-and-mortar care,” said Lawrence Casalino, MD, PhD, division chief and professor at the Weill Cornell Department of Healthcare Policy and Research.

“So if they’re paid at the same rate … they’re basically going to drive a lot of brick-and-mortar providers, especially ones that provide a lot of primary care or cognitive care, out of business.”

Telehealth expansion should be extensively pilot-tested before any permanent decisions are made, said Marjorie Ginsburg, the founding director of the Center for Healthcare Decisions Inc.

“I don’t think that what we’ve done with the pandemic can be considered pilot testing,” she said.


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