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MedPAC Discusses Draft Recommendations on Payment Updates for 2020

December 5, 2019

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Kate Ogden, Physician Payment & Quality Specialist
Mary Mullaney, Director, Hospital Payment Policies

The Medicare Payment Advisory Commission (MedPAC) Dec. 5-6 met to discuss the Commission’s draft recommendations related to payment adequacy and payment updates for physician services and inpatient and outpatient hospital services.

Payment Adequacy and Payment Updates for Physician Services

MedPAC staff presented on payment adequacy and updates for physician services, reviewing beneficiary-reported access to care, quality of care, and Medicare payments and providers’ costs. Based on a survey, staff stated that most beneficiaries report good access to care, similar to that of privately insured individuals, and that the supply of clinicians continues to grow. Staff noted that while the overall number of clinicians has grown, there has been rapid growth among advanced practice registered nurses (APRNs) and physician assistants (PAs) and a slight decline in the number of primary care physicians.

In assessing the quality of care, staff reported that most clinicians participating in the Medicare program receive a positive merit-based incentive payment system (MIPS) payment adjustment or the 5% advanced alternative payment model (APM) bonus. Staff also reported that under population-based measures, the quality of ambulatory care is mixed, noting that consumer assessment of health care providers and systems (CAHPS) patient experience scores are generally stable, but other scores experience geographic variation.

Lastly, MedPAC staff reviewed Medicare payments and providers’ costs, reporting that Medicare payments and input costs are growing. Staff pointed out that while median physician compensation from all payers grew from 2014 to 2018, there is still significant variation by specialty, with primary care physicians being compensated at significantly lower rates than procedural specialties. Staff noted that the changes to evaluation and management reimbursement in the 2020 Medicare Physician Fee Schedule will increase the overall relative value units (RVUs) for primary care physicians, but they still feel that CMS has more work to do in improving the accuracy of the fee schedule. The Commission’s draft recommendation, that Congress should update the 2020 Medicare payment rates in calendar year (CY)  2021 for physicians and other health professional services by the amount determined under current law, was agreed upon and will be formally voted on during the January 2020 meeting.

Ambulatory Surgical Centers Payment Adequacy

MedPAC staff discussed payment adequacy and the recommendation for CY 2021 payment update for ambulatory surgical centers (ASCs). ASC payment adequacy measures remain positive. As more Medicare beneficiaries are being served in ASCs, there has been a substantial increase in Medicare payments, but ASCs are not required to submit cost data to Medicare. Commissioners discussed the need for increased reporting of ASC cost data in order assist in determining payment updates. MedPAC’s draft recommendation for CY 2021 asks Congress to eliminate the update to the conversion factor for ASCs and require ASCs to report cost data. MedPAC also suggests strengthening quality reporting for ASCs to ensure improved beneficiary outcomes.

Hospital Inpatient and Outpatient Payment Adequacy

Hospital payment adequacy indicators generally remain positive. However, overall Medicare margins at inpatient prospective payment system (IPPS) hospitals remain negative and increased to -9.3% in 2018. MedPAC attributes this increase to CMS’s overestimate of input price inflation, more extensive coding of diagnoses and improvements in efficiency, and increased revenue from Medicare Part B drugs. Outpatient prospective payment system (OPPS) payments saw positive growth (+7.2%) in 2018, which MedPAC states was driven by Part B drug price increases and new, expensive drugs; a shift of services from physician offices to hospital outpatient departments as hospitals acquire physician practices; and a shift of some complex services from inpatient to outpatient settings.

Rural hospitals had higher Medicare margins and larger increases than urban hospitals. For-profit hospitals continue to have the highest Medicare margins of all groups. MedPAC’s draft recommendation for 2021 consists of a 2% update to the 2020 Medicare base payment rate for acute care hospitals and the provision of an amount equal to 0.8% of 2021 payments to hospitals through the Hospital Value Incentive Program (HVIP), which increases payments by eliminating penalties under the current hospital quality reporting program.

Hospitals would receive the current payment update for 2021 if Congress chooses not to adopt MedPAC’s recommendations. 

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