Washington Highlights: September
15, 2006
MedPAC Discusses IME and DSH Payments
Contents
Prior Issues
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At its Sept. 7-8 meeting, the Medicare Payment Advisory Commission
(MedPAC) heard staff present on Medicare indirect medical education
(IME) and disproportionate share (DSH) payments and began what will
be a continuing discussion on the value and role of these payments
to hospitals and their relationship to Medicare policy goals.
MedPAC most recently examined IME payments in 2002-2003 when the
commission narrowly voted down (9-8) a draft recommendation to reduce
the level of the IME adjustment to 2.7 percent - the level that
would more closely correspond to the higher Medicare patient care
costs of teaching hospitals according to MedPAC staff regression
analyses. MedPAC Chair Glenn Hackbarth stated that IME was placed
on the September meeting agenda because both the House and Senate
are interested in the Medicare IME adjustment, and he is concerned
about the growing disparity in Medicare margins between teaching
hospitals and other hospitals.
MedPAC staff presented statistics regarding the size and distribution
of IME and DSH payments, noting that these payments are highly concentrated.
According to the analyses, in 2004, 200 hospitals accounted for
68 percent of total IME payments, 38 percent of total DSH payments
and 45 percent of total IME and DSH payments. Staff also presented
data on the Medicare financial performance of hospitals and noted
that major teaching hospitals have the highest Medicare inpatient
margins: 11.4 percent in 2004. Major teaching hospitals that receive
both IME and DSH payments have the highest margins, 12.5 percent,
compared to Medicare inpatient margins of only 2.3 percent for those
major teaching hospitals that receive only IME payments. The aggregate
Medicare inpatient margin for all hospitals is -0.3 percent.
MedPAC staff presented several policy questions for the commission
to consider including whether the current levels for IME and DSH
payments are justified and what formulas would provide the best
distribution of IME and DSH payments. In a departure from the discussion
in 2003, both the staff and Chairman Hackbarth suggested that if
any payment cuts are contemplated, consideration should be given
to returning the savings to the base Medicare payment rates for
all hospitals. In 2003, the draft recommendation would have returned
savings to the Medicare Trust Fund.
The commission discussion focused almost entirely on teaching hospitals
and the IME adjustment. All of the commissioners who spoke voiced
support for studying this issue, with many expressing interest in
obtaining a better understanding of the broader social mission activities
provided by teaching hospitals.
Commissioners Ralph Muller and Sheila Burke were unable to attend
the meeting, but their written statements were read to the commission.
Both commissioners highlighted that a portion of the IME adjustment
is supporting a social policy. Burke noted that although there is
a reasonable argument to be made that social policy should be funded
through general revenues or means other than the Medicare program,
the concern is that Congress may not allocate the necessary funds
for this purpose. In addition, even if MedPAC were to recommend
that any IME reduction savings be redistributed to all hospitals,
Congress is not obligated to do so and may choose to take the money
out of the system. Muller noted that the commission also should
take into consideration teaching hospitals' total and overall Medicare
margins, which are much smaller than the inpatient margins and lower
than those of the other hospital groups.
Other issues discussed at the meeting included:
- physician payment issues [see related article];
- Medicare's financial sustainability;
- the reengineering of health care; and
- focusing on "episodes of care" rather than focusing
solely on inpatient admissions.
Information:
Karen Fisher, Sr. Director, Health Care Affairs
AAMC Health Care Affairs
kfisher@aamc.org
(202) 862-6140
Diana Mayes, Specialist
AAMC Health Care Affairs
dmayes@aamc.org
(202) 828-0498
Finance Committee Releases Hospital Survey Results
Senate Finance Committee Chairman Charles Grassley (R-Iowa) Sept.
12 released responses
to the committee's 10-hospital survey regarding the provision of
charity care and community services. According to a related memorandum
from Grassley, the survey results indicate that "non-profit
doesn't necessarily mean pro-poor patient." While the memorandum
states that "many non-profit hospitals are well-intended and
do outstanding work on behalf of their communities," it also
advises that "it's almost impossible to get an exact measurement"
of the charity care and community services provided by such hospitals.
Grassley remarks that "this calls into question whether non-profit
hospitals deserve the billions of dollars in tax breaks they receive
from federal, state, and local governments."
Grassley also released what he described as "very eye-opening"
letters dated July
20 and Aug.
31 from the Federation of American Hospitals (FAH) highlighting
charity care provided by for-profit hospitals. He commented that
several for-profit hospitals provide "as much if not more charity
care than some non-profit hospitals." He stated that there
was "often very little difference when it comes to serving
the community."
The 10 survey recipients (including several AAMC members) were:
Advocate Health Care Network and Advocate Health and Hospitals Corp.,
Banner Health, The Cleveland Clinic, Fairview Health Systems, New
York Presbyterian Hospital System, North Mississippi Health Services,
Phoebe Putney Health Systems, Resurrection Medical Center and Resurrection
Health Care, Sutter Health, and William Beaumont Hospital.
Information:
Christiane Mitchell, Director, Federal Affairs
AAMC Government Relations
cmitchell@aamc.org
(202) 828-0526
Finance Committee Considers Tax-Exempt Status
of Not-For-Profit Hospitals
Senate Finance Committee Chair Charles Grassley (R-Iowa) Sept.
13 directed his staff to assemble a "discussion paper"
of options to assure that tax-exempt hospitals "deliver their
fair share" of indigent care and community benefit. Grassley
made the announcement at the conclusion of a Finance Committee hearing
on community benefit guidelines for tax-exempt hospitals.
The discussion paper will help the Finance Committee determine
what regulatory action the Internal Revenue Service (IRS) should
take, as well as actions that would require legislation. During
the hearing, Grassley praised the hospital community for their "good
faith efforts" at addressing the community benefits issue,
but did not rule out legislative action.
According to Grassley, the staff proposals will build upon the
community benefit reporting model developed by the Catholic Health
Association (CHA) and VHA, Inc. They will reflect input from the
hospital community, patient advocates, and the IRS, and will take
the same approach Grassley used in evaluating other charitable reforms.
At the Sept. 13 hearing,
witnesses from the American Hospital Association (AHA), CHA, and
a Montana critical access hospital detailed the levels of charity
care and community benefit provided by tax-exempt hospitals. They
also expressed support for the CHA/VHA community benefit reporting
model. However, the AHA noted an "intellectual difference"
regarding "the unpaid costs of government-sponsored health
care." Specifically, AHA believes that the unpaid costs of
Medicare are a community benefit, while the CHA does not. The AHA
noted that several states consider Medicare "underpayment"
a community benefit.
The hearing also raised the issue of tax-exempt debt. The AHA witness,
Chair-Elect Kevin Lofton, disputed claims that current policy favored
large hospitals and health systems that have the cash necessary
to access tax-exempt bonds. Lofton explained that community and
critical access hospitals are often part of larger health systems
that can access tax-exempt bonds.
Information:
Christiane Mitchell, Director, Federal Affairs
AAMC Government Relations
cmitchell@aamc.org
(202) 828-0526
MedPAC Discusses Alternatives To SGR for Physician
Updates
At its Sept. 7-8 meeting, the Medicare Payment Advisory Commission
(MedPAC) presented preliminary data for its March 1, 2007, report
on alternatives to the Sustainable Growth Rate (SGR), as required
by the Deficit Reduction Act of 2005 (DRA). The SGR is a statutory
formula used to update physician payments by comparing the actual
growth rate of physician services to a cumulative target. Due to
several years of actual growth exceeding the target, the SGR formula
is estimated to reduce physician payments for the next several years,
including a 5.1 percent reduction for 2007.
The DRA requires MedPAC to assess different options for controlling
physician volume without harming beneficiary access and to evaluate
administrative burden and data requirements for the alternatives.
The DRA also requests information on applying volume controls for
five different target pools: group practices; hospital medical staff;
types of service; geographic areas; and physician outliers. At this
meeting, staff presented options for types of services and geographic
areas.
Staff raised several issues in determining targets, including whether
or not targets should be cumulative, should they be based on objective
levels, growth, or trend data. Potential targets to control volume
by type of service include relating growth in services to growth
in the gross domestic product (GDP) or GDP plus a percentage point;
comparing growth to trend data; or adjusting updates for different
types of service by incorporating changes in physician productivity.
In evaluating geographic adjustments, MedPAC staff noted policies
could incorporate both volume growth and volume levels for geographic
areas.
The commission discussion focused more on global issues relating
to volume control targets rather than debating the specific options.
Several commissioners noted that physicians are the only providers
subject to a target volume control and some questioned the use of
GDP growth as an appropriate target measure, while others noted
the GDP was starting point for what society could afford. While
MedPAC is required to evaluate the alternatives, they are not required
to endorse them.
In addition to SGR reform, MedPAC also discussed valuing practice
expense for physician services. They summarized CMS's proposed methodological
changes and outlined a work plan to evaluate indirect practice expense
costs and geographic adjustments for practice expenses.
MedPAC also presented an introduction on composite quality indicators,
which are indicators that aggregate several individual quality metrics.
MedPAC will evaluate possible composite measures that could be built
using Medicare data.
Information:
Mary Patton, Senior Specialist
AAMC Health Care Affairs
mpatton@aamc.org
(202) 862-6297
House Panel Examines HHS, NIH Responses to Conflicts
of Interest
The House Energy and Commerce Subcommittee on Oversight and Investigations
Sept. 13 held a hearing entitled "Continuing Ethics and Management Concerns at NIH
and the Public Health Service Commissioned Corps." The hearing
was another in a series of sessions examining allegations of conflict
of interest by NIH intramural scientists. Much of the committee's
attention was directed at the delay in response by the Commissioned
Corps to two high profile cases involving Corps members employed
at the NIH that the HHS Office of Inspector General had recommended
for further investigation. John Agwunobi, M.D., HHS Assistant Secretary
of Health, testified the Commissioned Corps had delayed a board
of inquiry in one of these cases at the request of the Department
of Justice, which had undertaken a criminal investigation into the
individual.
Committee members also criticized the laxity of punishments handed
out by NIH to a number of intramural scientists who had violated
prior ethics rules by failing to seek approval or even report consulting
relationships with industry, failing to take annual leave while
consulting, or consulting on areas that overlapped with their official
duties. Raynard Kington, M.D., Principal Deputy Director of NIH,
testified on the ethics reforms that NIH has implemented in response
to the committee's earlier inquiries and the agency's own internal
investigations and the actions NIH took to discipline the scientists
in question.
Information:
Dave Moore, Senior Director
AAMC Government Relations
dbmoore@aamc.org
(202) 828-0525
NGA Presents Reform Recommendations to Medicaid
Commission
At the Sept. 6 -7 meeting of the Medicaid Commission, National
Governors Association (NGA) Executive Director Ray Scheppach identified
several program reforms that should be included in the Commissioners'
final report to HHS Secretary Michael Leavitt. The final report
is due Dec. 31. According to the Commission's "Road Map"
for completing the report, it will vote on final recommendations
in mid-November.
Scheppach outlined an array of specific recommendations, including
the development of a new process to allow permanent adoption of
Section 1115 waiver programs that demonstrate "a history of
solid achievement." He added that other states should be able
to "replicate the proven success of these models" without
applying for a waiver. Scheppach also suggested the creation of
a "National Health Care Innovation Program" that supports
efforts to improve quality and control costs via health information
technology. Such an initiative, Scheppach advised, would allow states
to "adopt policies such as price transparency and ... pay-for-performance
and other quality measurement tools."
On behalf of the NGA, Scheppach discouraged the Commission from
including the Administration's proposed administrative changes to
the Medicaid program (e.g., reducing the allowable provider tax
rate and limiting payments to government providers). Warning that
these proposals "are nothing more than cost shifts to states"
and "should be off the table," Scheppach urged the Commission
to "look for further reforms that benefit both the federal
government and states."
Also during the meeting, Medicaid Commission consultant Charles
Milligan of the Center for Health Program Development and Management
at the University of Maryland explained that Medicaid financing
"often pursues purposes" that "advance other health
policy goals." He cited Medicaid disproportionate share (DSH)
payments, cost-based reimbursement for federally-qualified health
centers, a 100 percent federal matching rate for Indian health services,
and graduate medical education as examples of Medicaid policies
that are "in tension with paying the 'lowest price' for services."
Milligan also explained the difficulties of "perfecting"
fraud and abuse prevention, including the potential denial of appropriate
care. Additionally, he presented data indicating a decline in access
to Medicaid providers, despite Medicaid fee increases.
Information:
Christiane Mitchell, Director, Federal Affairs
AAMC Government Relations
cmitchell@aamc.org
(202) 828-0526
CMS Announces Gainsharing Demonstration
Centers for Medicare and Medicaid Services (CMS) Sept. 11 announced
in the Federal Register (71 Federal Register 54355) the availability
of an application and other materials for participation in a gainsharing
demonstration project that was required by the Medicare Modernization
Act (MMA). According to CMS, "this demonstration will examine
approaches that involve long-term follow-up to assure both documented
improvements in quality and reductions in the overall costs of care."
Of particular interest to CMS are demonstrations that track patients
beyond a hospital episode to determine the impact of hospital-physician
collaborations on preventing short and longer-term complications,
duplications of services, coordination of care across settings,
and other quality improvements that hold promise for eliminating
preventable complications and unnecessary costs. CMS is seeking
projects submitted by consortia that are comprised of health care
groups and their affiliated hospitals. No more than 72 hospitals
can be included across all projects. Applications must be received
by Jan. 9, 2007.
Information:
Ivy Baer, Director & Regulatory Counsel
AAMC Health Care Affairs
ibaer@aamc.org
(202) 828-0490
AAMC Signs Budget Process Letter
The AAMC joined 116 other national health organizations on a Sept.
11 letter
urging Congress to oppose budget process reform measures. The letter
organized by the Coalition for Health Funding describes the potential
harm of a line-item veto authority for the President and the creation
of appointed sunset commissions.
The letter contends that the line-item veto will counteract the
regular budget and appropriations process by which Congress has
restored funding for many health programs proposed for cancellation
by the President. The letter also questions the need for sunset
commissions with the existence of program reviews conducted through
the Office of Management and Budget, the Congressional Budget Office,
and the Government Accountability Office.
The House June 22 approved legislation (H.R.
4890) granting the President the authority to propose a package
of rescissions that Congress must consider within twelve days, without
opportunity for amendments [see Washington
Highlights, June 23].
A bill (H.R.
3282) requiring a commission to review all federal agencies
and departments every twelve years to avoid abolishment is awaiting
floor consideration in the House. Another bill (H.R.
5766) in the House creates a similar commission whose recommendations
would be granted expedited consideration without amendments. H.R.
5766 passed the Government Reform committee and must gain approval
of the Rules and Budget Committees.
In the Senate, S.
3521 packaged both the line-item rescission and sunset commission
with other budget reform measures, and was approved by the Senate
Budget Committee. Unlikely to withstand a filibuster as a package,
the line-item and sunset commission provisions may be considered
as part of stand-alone bills.
Information:
Tannaz Rasouli, Senior Legislative Analyst
AAMC Government Relations
trasouli@aamc.org
(202) 828-0525
Senators Urge Exclusion of Higher Ed Report from
Negotiated Rulemaking
In a Sept. 6 letter to Secretary of Education Margaret Spellings, a bipartisan group
of 12 members of the Senate Committee on Health, Education, Labor,
and Pensions requested that an upcoming report on higher education
be excluded from the proposed negotiated rule making process. The
letter refers to an Aug. 18 Federal Register notice
announced the department's intention to prepare proposed regulations
for implementing the Higher Education Reconciliation Act of 2005
(P.L.
109-171) and the recommendations of the Secretary of Education's
Commission on the Future of Higher Education. The commission Aug.
9 released a third draft
report with broad recommendations concerning access, affordability,
transparency, and financial aid. The commission is expected to release
a final report shortly.
The Senators' letter also indicates that the commission report
will require legislation, which may be included in the reauthorization
of the Higher Education Act (H.R.
609, S.
1614), which passed the House in March, but has yet to be considered
by the Senate. [see Washington
Highlights, March 31].
Information:
Matthew Shick, Senior Legislative Analyst
AAMC Government Relations
mshick@aamc.org
(202) 862-6116
Senate, House Approve Earmark Transparency Bill
The House Sept. 13 passed by a voice vote the "Federal Funding
Accountability and Transparency Act of 2006" (S.
2590), clearing the measure for the President. The Senate approved
the bill Sept. 7. S. 2590, introduced by Sen. Tom Coburn (R-Okla.),
directs the Office of Management and Budget (OMB) to create a free
public database of entities that receive federal funding greater
than $25,000.
The Web site will provide data for FY 2007 and subsequent years,
including the name of the recipient, award amount, award type (e.g.,
grant, contract, subgrant), industry classification, location of
the recipient and the primary place of performance, federal agency
and program source, and detailed title and description of each award.
In addition, each entity or parent entity receiving federal funds
will be assigned a unique identifier.
The bill also establishes a pilot program to test methods of subaward
data collection and reporting. Entities with gross incomes that
do not exceed $300,000 temporarily will be exempt from reporting
subawards until such time as OMB determines the reporting requirements
will not cause an undue burden.
Finally, the bill requires the OMB Director to submit annual reports
to Congress, including data regarding the usage of the site and
public feedback received and an assessment of the reporting burden
placed on recipients of federal funding.
Information:
Matthew Shick, Senior Legislative Analyst
AAMC Government Relations
mshick@aamc.org
(202) 862-6116
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