Washington Highlights: October
13, 2006
ContentsPrior Issues  |
MedPAC Continues Discussions on IME and DSH Adjustments;
Physician Payments
At its Oct. 5-6 meeting, the Medicare Payment Advisory Commission
(MedPAC) continued the discussion
that it began at the September meeting on the purpose of indirect
medical education (IME) and disproportionate share (DSH) payments
within the Medicare program [see Washington
Highlights, Sept. 15].
Commission staff provided information showing that the "empirically
justified" IME adjustment based on 2004 hospital data and Medicare
policies was 2.1 percent, which is significantly less than the 5.35
percent adjustment that is currently paid to teaching hospitals.
Staff noted that the adjustment would be 2.2 percent if Medicare
adopted the commission's recommendations on DRG refinements. The
empirical level is based on regression analyses that attempt to
explain the higher patient care costs of teaching hospitals compared
to nonteaching hospitals. Staff analyses also showed that the empirical
level of the DSH adjustment was significantly lower than the current
DSH payment levels. As a result, Medicare inpatient margins for
hospitals receiving these payments are higher than for other hospitals.
Commission discussion centered around why the current DSH and IME
adjustments are higher than their empirical levels, with an emphasis
on the broader social missions of these institutions. The discussion
focused primarily on IME payments, with staff noting that when the
inpatient prospective payment system (PPS) was implemented, Congress
purposely set the adjustment at double the empirical level out of
concern that teaching hospitals would fare poorly under the PPS.
However, actual experience showed that teaching hospitals did not
suffer financially under the PPS as originally feared.
Some staff and commissioners noted that teaching hospitals provide
other important societal benefits, such as providing uncompensated
care, using cutting edge technologies, and maintaining stand-by
capacity, which might justify the additional payments. Also discussed
was whether the best funding source for these functions is federal
appropriations rather than the Medicare program.
At the end of the discussion, Chair Glenn Hackbarth reiterated
his concern about the level of the IME adjustment, stating that
if one of the purposes of the IME adjustment is to compensate teaching
hospitals for handling more complex and sicker patients, that purpose
can be dealt with more directly by refining the Medicare inpatient
PPS diagnosis-related groups (DRGs), which MedPAC has recommended
in the past. According to Chairman Hackbarth, if this recommendation
were adopted it would allow at least "at least some piece of
IME" to be put in the base payment rates for all hospitals.
The discussion on the DSH adjustment continued to focus on the
need to obtain reliable uncompensated care data from hospitals so
that DSH payments could be better targeted to those hospitals that
provided higher levels of uncompensated care. Currently, the DSH
formula distributes payments based on a hospital's level of Medicaid
and poor Medicare patients.
On the physician front, in preparation for its March 2007 mandated
report to Congress, MedPAC continued evaluating alternatives to
the sustainable growth rate (SGR) system for controlling growth
in physician services. The commission presented several ideas they
might recommend that were not explicitly mentioned in the statutory
report request. These options include:
- implementing pay-for-performance;
- encouraging coordination of care;
- bundling physician services;
- ensuring accurate prices for physician services;
- promoting use of primary care;
- exploring the benefits of physician groups;
- revisiting Medicare benefit design;
- measuring physician resource use;
- using clinical and cost-effectiveness information;
- imposing quality standards as a condition of participation;
and
- capitalizing on contractor reform.
Chairman Hackbarth reiterated that these options were "draft"
and that items may be added to or deleted from the list of considerations.
Also related to the SGR report, commissioners heard a panel discussion
on the structure and organization of physician groups, and how financial
and quality incentives might be applied to physician medical groups.
In other areas, the commission discussed:
- alternatives to the current hospital wage index;
- trends in Medicare Part D (prescription drug) enrollment and
payment;
- a Congressional mandated rural hospital report, and
- an initial examination into the profile of future Medicare
beneficiaries.
The next MedPAC meeting will be held Nov. 8-9.
Information:
Karen Fisher, Sr. Director, Health Care Affairs
AAMC Health Care Affairs
kfisher@aamc.org
(202) 862-6140
Denise Dodero, Sr. Director, Health Care Affairs
AAMC Health Care Affairs
ddodero@aamc.org
(202) 828-0493
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