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  • Washington Highlights

    MedPAC Discusses Annual Payment Updates, 340B Incentives, Part D, and ACOs


    Andrew Amari, Hospital Policy and Regulatory Specialist
    Phoebe Ramsey, Director, Physician Payment & Quality

    The Medicare Payment Advisory Commission (MedPAC) met Jan. 16-17 to discuss annual payment adequacy and updates, whether participation in the 340B program incentivizes use of more expensive drugs, the status of the Part D program, and improving beneficiary assignment to accountable care organizations (ACOs) in the Medicare Shared Savings Program.

    Assessing Payment Adequacy and Updating Payments for Hospitals

    MedPAC continued its discussion on hospital payment adequacy [see Washington Highlights, Dec. 5, 2019] as Commissioners unanimously voted to approve a draft recommendation to Congress that, if adopted, would provide a 3.3% net payment update for acute care hospitals in 2021. The update would be comprised of a 2% update to the base payment rate, a 0.8% increase from previous hospital value incentive program (HVIP) recommendations [see Washington Highlights, Mar. 22, 2019] and an additional 0.5% increase from eliminating penalties under the current hospital quality reporting program. MedPAC staff expects the updated payments could improve Medicare margins from -9.3% to -8.0%. While Commissioners supported the recommendation, several expressed concern that the HVIP recommendations were unlikely to be adopted before 2021. In response, other Commissioners clarified that if Congress does not adopt MedPAC’s HVIP recommendations, the currently scheduled 2021 update of 2.8% for acute care hospitals would go into effect.

    340B and Incentives for Participating Hospitals

    MedPAC staff presented hospital financial incentives under the 340B Drug Pricing Program as part of a broader Congressional request for information on health care provider consolidation. Specifically, they looked at two questions: Can the availability of 340B drug discounts create incentives for hospitals to choose more expensive products in some cases, and if so, what would the impact be on Medicare patients’ cost-sharing for such drugs? MedPAC analyzed 340B status relative to cancer drug spending by comparing the average cancer drug spending per month through Parts B and D across five types of cancer before 2018. Researchers found evidence of higher drug spending at 340B hospitals for two of the five cancer types (lung and prostate) but were unable to attribute those findings to incentives created by 340B discounts. Additionally, they found that effects on cancer drug spending are likely to be idiosyncratic and not generalizable to other cancers or conditions and that overall effects on cost-sharing for cancer patients is likely to be small.  

    Commissioner discussion included guidance to staff on finalizing the report ahead of the March 2020 deadline. On the question of broader consolidation, Commissioners proposed a greater discussion on the dichotomy of consolidation impact on prices versus impact on quality improvement and the positive developments of centers of excellence for highly specialized care.

    Status Report on Part D Program and Options for Restructuring

    MedPAC staff provided an annual status report on the Part D program before proposing a potential restructuring of the program based on previous Commission work. The proposal included two major components to restore the risk-based capitated approach and eliminate program features that distort market incentives: (1) making plans responsible for a consistent 75% of spending between the deductible and out-of-pocket threshold and (2) restructuring the catastrophic benefit to eliminate enrollee cost sharing and shift insurance risk from Medicare to plan sponsors and pharmaceutical manufacturers.

    Commissioners broadly supported the initial proposed restructuring approach. Staff will present more on the proposal in the March and April 2020 public meetings before a formal Commission recommendation to Congress is submitted for the June 2020 report.

    Improving ACO Beneficiary Assignment

    MedPAC staff also presented two concerns with ACO benchmarking and assignment in the Medicare Shared Savings Program (MSSP): (1) use of tax identification numbers (TINs) to create spending benchmarks and assess spending performance and (2) the ability for ACOs to choose retrospective beneficiary assignment.

    To the first topic, staff presented three options for defining the ACO: collection of TINs (as currently used in the MSSP), collection of TIN/National Provider Identifier (NPI) combinations (as used in the Next Generation ACO model), or a collection of NPIs. Staff presented the concern that use of TINs (whether alone or in combination in an NPI) could result in unwarranted shared savings because of NPIs’ ability to leave or join a TIN without the benchmark shifting in response to that change. The potential benefit of the last option is a reduction in inaccuracies to the benchmark and performance year spending as the definition would be based upon the NPI’s total spend, but it would limit clinicians to participation in only one ACO. Commissioners debated the potential for a future recommendation that MSSP should only use NPIs to identify clinicians in ACOs.

    Staff presented their broader concerns with the use of retrospective assignment methodology (in which ACOs receive quarterly assignments of patients but are settled on a final patient list retrospectively at the end of the performance year), which is potentially open to manipulation. For example, the ACO could target low-spending patients at the end of the performance year with a wellness visit to trigger assignment to the ACO at final settlement. Under prospective assignment, ACOs receive an assigned patient population at the start of the performance year, which does not allow additional patients to be assigned to the ACO during the year. Commissioners debated potential for a future recommendation to mandate prospective assignment in the MSSP.

    Other topics discussed included annual payment adequacy and payment updates for physicians, outpatient dialysis services, post-acute care, and ambulatory surgical centers in addition to an update on modeling a new Medicare Advantage quality value incentive program.