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  • Washington Highlights

    MedPAC Discusses Ambulatory Setting Payment, Social Determinants of Health, and APMs


    Mary Mullaney, Director, Hospital Payment Policies
    Brad Cunningham, Sr. Regulatory Analyst, Graduate Medical Education
    Phoebe Ramsey, Director, Physician Payment & Quality
    For Media Inquiries

    The Medicare Payment Advisory Commission (MedPAC) met on April 7 and 8 to discuss a variety of policy issues, including recommendations to align fee-for-service payment rates across ambulatory settings, Medicare policy options for addressing social determinants of health (SDOH), and harmonizing Medicare’s portfolio of alternative payment models (APMs). The commission also discussed Medicare drug prices and Part D plan policy. These topics will be included in MedPAC’s June 2022 report to Congress.

    Aligning Fee-For-Service Payment Rates Across Ambulatory Settings

    MedPAC staff presented a proposal that would align Medicare payment rates for items and services furnished in hospital outpatient departments, physician offices, and ambulatory surgical centers. Staff contended that the higher rates paid under the Outpatient Prospective Payment System (OPPS) leads to the conversion of provider-based departments into hospital outpatient departments. Staff acknowledged that patient acuity tends to be higher in the latter, as compared to other sites of care. MedPAC staff found that for certain ambulatory payment classifications identified as being safely performed on most beneficiaries in a lower cost setting, aligning payment rates across settings would decrease payments under the OPPS and ambulatory surgical center payment systems and reduce beneficiary cost sharing. Further, so-called site neutrality reimbursement would steer patients to the efficient sites of care. Rural and government hospitals would see a decrease in payments under the proposal while taking into account current budget neutrality adjustments. The commission will include this proposal in the June 2022 report to Congress.

    Leveraging Medicare Policies to Address SDOH

    Commission staff detailed key policy initiatives and future research topics for addressing SDOH by analyzing Medicare payment across beneficiaries with social risk factors. A possible model put forward for consideration would stratify providers into peer groups depending on whether they treat patient populations with high social risk factors, similar to current policy to stratify hospital readmissions penalties by proportion of dual eligible beneficiaries treated. MedPAC’s past work to address SDOH has focused on payment systems that incentivizes achieving value in care, including prior recommendations to expand the peer-grouping approach to Medicare Advantage plans and post-acute care quality performance programs. Throughout the meeting, staff and commissioners highlighted the need to collect SDOH data to better inform any future payment models. While it is possible to collect SDOH data through Medicare Advantage and accountable care organization (ACO) payment models, traditional Medicare fee-for-service payment does not currently have a mechanism to incentivize providers to collect and report SDOH data. Commissioners and staff expressed concern that SDOH interventions may increase the practice cost and disadvantage some providers that have a higher proportion of at-risk patients.

    Potential Guidelines for Harmonizing APMs

    Commissioners discussed preferences for improving the Center for Medicare & Medicaid Services’ (CMS’) portfolio of APMs, following last years’ recommendation to Congress that the agency adopt a more harmonized portfolio of models [refer to Washington Highlights, April 2, 2021]. Broadly, they discussed the potential for recommending six factors that the CMS could consider when pursing new episode-based APMs, including how well an episode could generate savings and quality improvements on top of population-based ACOs and whether it would be expected to reduce health care disparities. Additionally, they discussed a potential set of principles for allocating savings and losses between ACOs and providers in episode models to balance the incentives in each model. Commissioners provided feedback on how to ensure participation in episodes does not discourage ACO participation, while acknowledging the successful care delivery improvements driven by episodic payment tests.