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  • Washington Highlights

    MedPAC Discusses IME Payment Policy


    Andrew Amari, Hospital Policy and Regulatory Specialist

    The Medicare Payment Advisory Commission (MedPAC) met Oct. 1-2 to discuss Medicare’s indirect medical education (IME) payment policy. 

    The commission staff provided an overview of current IME payments to teaching hospitals, including background on the existing methodology and statutory authorities for these payments. The presentation revisited previous discussions on IME payment policy [see Washington Highlights, Sept. 6, 2019] and outlined potential revisions that would account for the shift in patient care from inpatient to outpatient settings.

    Specifically, the staff members proposed that the current IME payment policy be modified to account for both inpatient care and outpatient care provided at teaching hospital outpatient departments where training occurs, distributed proportionally based on teaching hospitals’ additional costs in each setting. They noted that outpatient IME should only apply when teaching hospitals have additional costs (e.g.,  excluding separately payable drugs), and they also proposed that the Centers for Medicare & Medicaid Services be given flexibility to update the IME methodology through rulemaking.

    As proposed, the modified 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.” During the discussion, it appeared that a transition would only occur if payments exceeded current law.

    Staff did not present impact data by teaching intensity, noting that their analysis showed little variation. However, staff did estimate that the top quartile of primarily inpatient teaching hospitals would see up to a 22% decrease in IME payments as a result of the redistribution, whereas outpatient-centric teaching hospitals would see a 28% increase. They also noted that hospitals with high shares of low-income patients would see a 6% reduction to IME payments.

    During the discussion, most commissioners expressed support for modifying IME payments to account for outpatient care. They also voiced substantial concern that disproportionate share hospitals and underserved communities would be negatively impacted under the proposal.

    Several commissioners pointed to the importance of IME payments, particularly for large teaching hospitals, such as academic medical centers, which have generally lower total margins and rely more on IME payments than non-major teaching hospitals. Some of the commissioners requested additional modeling of the financial impact on teaching hospitals before any development of recommendations. Additionally, the commissioners voiced concerns over potential unintended consequences of the proposal, such as suppressing training in primarily inpatient specialties or incentivizing the acquisition of physician practices.

    The commission staff will address the concerns and continue to work toward recommendations on this topic for future meetings.