A pair of key panels advising Congress on Medicare and Medicaid policy recommended lawmakers adopt contentious site-neutral payments for certain ambulatory services and amend the Social Security Act to better protect disproportionate share hospital (DSH) payments during economic downturns.
These reimbursement suggestions from the Medicare Payment Advisory Commission (MedPAC) and the Medicaid and CHIP Payment and Access Commission (MACPAC) were published Thursday in reports prepared by the groups each June.
The recommendation on Medicare fee-for-service payments in ambulatory settings, from MedPAC, has been a hot spot of lawmaker scrutiny and hospital industry lobbying.
Current payment rates are typically higher for outpatient settings affiliated with a hospital, which critics say contributes to higher healthcare spending and incentivizes physician practice consolidation with hospitals. Hospitals argue that the increased rates fund additional services supported in outpatient departments and that trimming pay rates would harm their ability to continue offering those services.
MedPac took the side of the former party, writing in its report (PDF) that “adjusting rates paid for certain services delivered in higher-cost settings to more closely align with the rates paid in lower-cost settings in which it is safe and appropriate to provide the service would reduce incentives to shift the billing of Medicare services from low-cost settings to high-cost settings.
“The result would be lower Medicare program spending, lower beneficiary cost sharing and an incentive for providers to improve efficiency by caring for patients in the lowest-cost site that is appropriate for their condition,” the commission wrote.
The services for which aligning payment rates across settings would be appropriate could be determined by reviewing which services are most commonly performed in each setting—i.e., if a specific procedure is currently performed most often in an ambulatory surgical center, “it would arguably be safe” to do so for most Medicare beneficiaries and align the payment rate at other settings, MedPAC wrote. Models supporting this stance aligned with the pay rates in the Outpatient Prospective Payment System (OPPS) rule and the physician fee schedule, the commission added.
Amending the pay rates for these services would be budget-neutral and “would have no immediate effect on total Medicare revenue for OPPS hospitals in aggregate,” MedPAC wrote, nor is it likely to “affect providers’ willingness or ability to furnish the expected services.”
In a news notice posted on its website, the American Hospital Association (AHA) wrote that it opposes MedPAC’s site-neutral policy recommendation and highlighted the impact current proposals would have on rural hospitals. The 2.5% Medicare revenue cut would bring these centers average total Medicare margin down from -17.8% “to an even more alarming -21%,” potentially fueling closures and harming rural communities, the AHA said.
MedPAC noted in the report that concerns specific providers—rural hospitals, for instance—could be hurt by the change “should be addressed through targeted assistance to those hospitals rather than maintaining higher payment rates for site-neutral services for all hospitals.”
On the other hand, MACPAC’s suggestion regarding uncompensated care payment changes for safety-net hospitals is likely more appealing to the industry.
In its own June report (PDF), the commission focused on the federal medical assistance percentage (FMAP), a funding metric set each year by the federal government that inversely dictates the maximum state governments can direct to jointly funded DSH funding.
As it’s established now under the Social Security Act, federal government decisions to increase the FMAP during an economic recession reduce total available DSH funding for all states, “although the need for DSH payments is greater. Calculating DSH allotments on a total funding basis would ensure total DSH funding is not affected by changes in the FMAP,” MACPAC wrote.
The commission made four recommendations on legislative amendments to achieve this goal, some of which detach total DSH funding from changes in FMAP and streamline the process the Centers for Medicare & Medicaid Services follows to finalize annual DSH allotments.
The commissioners who make up MedPAC and MACPAC voted unanimously in support of these recommendations during public meetings held in April. The June reports represent the independent experts’ formal recommendations to Congress.