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  • Washington Highlights

    MedPAC Discusses Provider Consolidation, Stand-alone Emergency Departments, and Drug Payments

    Ivy Baer, Senior Director and Regulatory Counsel
    Susan Xu, Lead Research Analyst
    Daria Grayer, Director, Regulation and Policy

    The Medicare Payment Advisory Commission (MedPAC) held a Nov. 3-4 meeting to discuss a range of Medicare issues, including different types of provider consolidation, stand-alone emergency departments (ED), and drug and device manufacturers’ payments to physicians and teaching hospitals.

    The first session of the day was on provider consolidation and the role of Medicare policy. Staff presentations concluded that with the various types of consolidation — horizontal (hospitals merge into systems; physicians merge into bigger practices), vertical financial integration (hospitals employ physicians), and vertical integration of provider functions and insurance risk (providers taking on insurance risk; insurers purchasing provider groups) — markets are not working to bring rates down to consistent levels. Warner Thomas, president and CEO, Ochsner Health System, cautioned that when thinking about the drivers of consolidation, consideration need to be given to many more factors than were considered by MedPAC staff, including drug and device pricing, as well as reductions in Medicare Advantage premiums. In addition, a distinction should be made between clinical integration, which is motivated by the need to achieve better care, and financial integration (consolidation), which may be the result of other factors. Given the belief that the markets are not functioning properly, many commissioners supported the need for more site neutral policies but generally agreed that these policies should be targeted so that they do not hurt sites that care for sicker patients who are unable to get care elsewhere.

    The session on stand-alone emergency departments looked at two types of freestanding emergency centers: those that are off-campus emergency departments (OCED) and those that are independent freestanding emergency centers (IFEC). Unlike IFECs, OCEDs are able to bill Medicare. As a consequence, many IFECs are affiliating with hospitals so that they also can bill Medicare. The Balanced Budget Reduction Act of 2015 (the “site neutral law”), which limits billing under the outpatient prospective payment system (OPPS) to those HOPDs that were billing under OPPS as of Nov. 2, 2015, has an exception for emergency departments. The exception was described by MedPAC staff as a loophole and is seen as one of the reasons for the growth in stand-alone emergency departments. The MedPAC commissioners would like to have additional information about the types of services provided in these freestanding EDs (difficult to obtain because Medicare currently does not require coding to identify freestanding EDs), incentives that may encourage the proliferation of ED, and a re-examination of the ED exemption in the site neutral law.

    MedPAC staff also presented a report on 2015 data on payments from drug and device manufacturers made to physicians and teaching hospitals. Based on previous proposals, the report made several recommendations:

    • Require reporting of payments to advanced practice nurses, physician assistants, and patient advocacy organizations;
    • Require manufacturers and distributors to report information about drug samples to the Secretary and make this information accessible through data use agreements; and
    • Link Open Payments data to Medicare Part D and Part B.

    The commissioners were in agreement regarding the recommendations proposed and expressed general support for further exploration of the trends in industry payments.

    MedPAC’s next meeting will be Dec. 8-9, 2016.