MACRA will have a bigger impact on hospital revenue than previously thought

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A new Health Affairs study finds that cuts in Medicare payments to hospitals as a result of the Medicare Access and CHIP Reauthorization Act could be as high as $250 billion by 2030 because of how physicians respond to the incentives built into the payment models, which encourage them to reduce the use of hospital care.

Although much of the attention on the Medicare Access and CHIP Reauthorization Act (MACRA) has focused on physician payments, a new study finds that the largest effects of the law may actually be on hospital revenue.

MACRA changes how the Centers for Medicare & Medicaid Services pays physicians who provide care to Medicare beneficiaries. It ties physician compensation to quality and encourages doctors to participate in alternative value-based payment models.

Researchers from the RAND Corporation set out to estimate the effects of the law on Medicare spending and utilization and how the effects differ under three different financial scenarios.

Their findings, published this week in Health Affairs, indicate that cuts in Medicare payments to hospitals could be as high as $250 billion by 2030 because of how physicians respond to the incentives built into the payment models. These changes include incentives to reduce hospital spending and as a result will reduce the use of hospital care, because physicians will make decisions to avoid admissions and readmissions.

“What we found was that physicians will be in a scenario where their Medicare payments are increasing very slowly over the next 10 years,” Peter S. Hussey, a senior policy researcher with the Rand Corporation and one of the authors of the study, told the Healthcare Financial Management Association.

In response, Hussey suggests that hospital leaders change their business models to account for the reduced inpatient revenues. Some of those changes may mean reducing costs, increasing outpatient revenues and improving the health of patient populations, Hussey said in the article.

Although the majority of healthcare providers say they are unprepared to meet MACRA’s reporting requirements, the future of the law remains unclear. Physician organizations have urged Department of Health and Human Services Secretary Tom Price, a physician, to make MACRA voluntary to reduce the regulatory burdens on doctors.