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MedPAC Continues Discussion of IME Payment Policy

March 5, 2021

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Andrew Amari, Hospital Policy and Regulatory Specialist
Brad Cunningham, Sr. Regulatory Analyst, Graduate Medical Education
Ki Stewart, Policy and Regulatory Analyst

The Medicare Payment Advisory Commission (MedPAC) met March 5 to discuss a recommendation to modify Medicare’s current indirect medical education (IME) payment policy, as well as other topics (see related story).

The commission staff provided an overview of current IME payments to teaching hospitals, including background on the existing methodology and statutory authorities for payments. The staff revisited its previous discussion on IME payment policy [see Washington Highlights, Oct. 2, 2020], citing the commission’s key concerns with the existing IME methodology, as they believe it does not reflect training that occurs in the outpatient setting and inconsistently covers the costs of treating Medicare Advantage (MA) beneficiaries.

The commission staff presented the chair’s draft recommendation, which states, “The Congress should require CMS to transition to empirically justified IME adjustments to both inpatient and outpatient Medicare payments.” In response to commissioners’ concerns, no vote was taken on the recommendation. The commission staff will make revisions and present a revised recommendation to the Commission at its next meeting. In addition, implementing this recommendation would require legislation.

The MedPAC staff’s proposal would revise IME policy to reflect the additional patient care costs of teaching hospitals in an outpatient setting, though staff indicated that the outpatient setting would only encompass those areas paid under the Outpatient Prospective Payment System. As elucidated during the commission discussion, the revised IME payment policy would redistribute current IME payments in a budget-neutral manner based on levels of inpatient and outpatient care, but it would eventually transition to “empirically justified payment levels.”

In modeling the revised IME policy, the staff found most teaching hospitals would see a change of less than +/-1.0% to their total Medicare fee-for-service (FFS) payments. However, the commission staff estimated that, overall, major teaching hospitals and teaching hospitals serving a high share of low-income patients would see the greatest decreases to their total FFS IME payments, 4.2% and 2.7%, respectively. Additionally, the staff said that while the overall median impact on teaching hospitals’ IME payments is 6%, some hospitals could see an up to 40% change in their IME payments as a result of the policy.

During the discussion, several commissioners expressed concern over the draft recommendation’s lack of specificity and requested the recommendation be updated to include additional details on how the payment policy would be modified to reflect training in the outpatient setting. Some questioned whether the proposed change would achieve the objective of increasing outpatient training, noting that the decision about where training occurs is a result of multiple factors, including changing clinical modalities, community needs and accreditation requirements. In addition, there also was a general concern about whether the movement of services to the outpatient setting would have the unintended consequence of raising Medicare Part B premiums for beneficiaries. Other commission members raised concerns over other possible unintended consequences of the proposal, such as suppressing training in primarily inpatient specialties or incentivizing the acquisition of physician practices.

Some commissioners expressed support for the policy change, but also requested that the staff provide more information to better illustrate the impact of the proposal.

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