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MedPAC Discusses Payment Adequacy and Updating Services and Redesigning the Hospital Quality Incentive Program

December 7, 2018

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PRESS CONTACTS
Kate Ogden, Physician Payment & Quality Specialist
Andrew Amari, Hospital Policy and Regulatory Specialist
Phoebe Ramsey, Sr. Regulatory Analyst, Quality & Payment Policy

The Medicare Payment Advisory Commission (MedPAC) met Dec. 6-7 to discuss payment adequacy and updates to payments for professional, inpatient, and outpatient services, as well as redesigning Medicare’s hospital quality incentive program. The commission discussed several draft recommendations, which will be voted upon at the January 2019 meeting.

Payment Adequacy and Updates for Physicians and Other Professionals: Commission staff provided background on addressing payment adequacy and updating payments to physicians and other health professionals. There is no fee schedule update in current law for 2020, other than the potential bonus for advanced alternative payment models (APM) participation. The role of advanced practice registered nurses (APRNs) and physician assistants (PAs) in the Medicare program has increased, as APRNs and PAs increasingly practice outside of primary care, with about half of nurse practitioners and about a quarter of PAs practicing in primary care.

Medicare does not have extensive specialty information on APRNs and PAs. Because of this, payment and practice data on APRNs and PAs is limited, compounded by “incident-to” billing. Medicare claims do not indicate when a service is billed “incident-to” but MedPAC analyses suggest a substantial share of services billed by APRNs and PAs is billed “incident-to” (40% in 2016).

To address these issues, the MedPAC Chair proposed several draft recommendations:

  • For calendar year (CY) 2020, Congress should update the 2019 Medicare payment rates for physicians and other health professional services by the amount determined under current law;
  • Congress should require APRNs and PAs to bill the Medicare program directly, eliminating “incident-to” billing; and
  • The Department of Health and Human Services Secretary should refine Medicare’s specialty designation for APRNs and PAs.

Commissioners supported the recommendations but wanted to spend more time on payment equity and payment adequacy of primary care versus specialty care providers. Commissioners will vote on the recommendations in January.

Payment Adequacy for Inpatient and Outpatient Services: Commission staff provided an update on payment adequacy and updating payments for hospital inpatient and outpatient services. Medicare margins dropped slightly for all providers between 2016 and 2017 from -9.7 percent to -9.9 percent. Major teaching hospitals’ margins, however, were slightly higher at -9.0 percent. Overall margins are projected to decline to -11 percent in 2019 due to expected cost growth.

From 2016 to 2017, outpatient spending increased 8.4 percent and inpatient spending increased by 2.5 percent. Looking at volume, both outpatient and inpatient services increased by 0.7 percent. Spending on Medicare Part B drugs drove the outpatient increase, specifically higher prices on existing drugs ($1 billion increase) and spending on new, pass-through drugs ($2 billion increase). Additionally, site neutrality will continue to be a high priority for the commission.

The commission discussed a draft recommendation related to these issues: For 2020, the Congress should update the 2019 base payment rates for acute care hospitals by 2 percent. The difference between this update and the amount specified in current law should be used to increase payments in the hospital value incentive program (HVIP).

Commissioners will vote on the recommendation in January.

Redesigning Hospital Quality Incentive Program: As a follow-up to its September meeting, the commission discussed options for a proposed HVIP design that would consolidate hospital quality reporting programs into one value-based program [see Washington Highlights, Sept. 7]. Although the proposed HVIP would increase inpatient spending relative to current law due to eliminating current quality penalty programs, it may improve care for beneficiaries by creating incentives for higher quality, more coordinated care, and would be less burdensome for providers and may increase their willingness and ability to furnish services. Additionally, between 82% and 95% of hospitals are projected to receive a reward relative to the withhold, with many hospitals receiving a reward under a 3% pool of dollars compared to a 6% pool.

The commission reviewed a draft recommendation on HVIP program redesign would that would include a small set of population-based outcome, patient experience, and value measures, score hospitals based upon absolute and prospectively set targets, and account for differences in patient’s social risk factors by distribution payment adjustments through peer grouping. The program’s measure set would be split among five equally weighted domains: Readmissions, mortality, hospital-acquired infections, patient experience, and cost.

Commissioners will vote on the HVIP recommendation consolidated with the payment update recommendation in January.

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