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  • Washington Highlights

    MedPAC Meets to Discuss Payment for Ambulatory Care and Safety-Net Providers

    Mary Mullaney, Director, Hospital Payment Policies
    Gayle Lee, Director, Physician Payment & Quality
    Ki Stewart, Policy and Regulatory Analyst
    Phoebe Ramsey, Director, Physician Payment & Quality
    For Media Inquiries

    The Medicare Payment Advisory Commission (MedPAC) met on Nov. 3 and 4 to discuss a variety of policy issues, including aligning fee-for-service (FFS) payment rates across ambulatory settings, supporting Medicare safety-net hospitals, Medicare policy options for increasing payment to primary care providers, and differences in quality measure performance across Medicare populations. MedPAC commissioners also discussed standardizing benefits in Medicare Advantage plans and a mandated report on a prototype design for a post-acute care (PAC) prospective payment system.

    Aligning FFS Payment Across Ambulatory Settings

    MedPAC staff reviewed previous reported findings related to a potential recommendation that would align Medicare payment rates for items and services furnished in hospital outpatient departments, physician offices, and ambulatory surgical centers [refer to Washington Highlights, April 8]. The higher rates paid under the Outpatient Prospective Payment System may incentivize the conversion of standalone office-based departments into hospital outpatient departments, resulting in increased costs to Medicare. Aligning lower payment rates across all sites of care could decrease Medicare outlays and decrease beneficiary cost sharing. However, using the lower payment rates on aligned services as program savings would require congressional action. Staff presented an alternative to reallocate the savings to Medicare from lower payment rates to providers that treat underserved populations.

    Some commissioners expressed concerns with any decrease in this site-neutral policy because the loss in reimbursement could negatively financially impact many providers that are still struggling in the wake of the pandemic and record-setting inflation. Commissioners were also concerned that this alignment may result in reducing access to certain services in some communities, if providers feel that it is more cost effective not to offer them. Other commissioners were supportive of aligning payments to encourage providing services in the most cost-efficient setting and believe that this policy would disincentivize consolidation and result in savings to Medicare. Commissioners will continue to address the topic due to the many potential downstream effects of this potential recommendation.

    Supporting Medicare Safety-Net Hospitals

    Discussions continued on ways to support hospitals that care for a high volume of low-income Medicare beneficiaries [refer to Washington Highlights, Sept. 30]. Under the proposal, hospitals that treat higher volumes of low-income beneficiaries would receive higher add-on payments than they may currently receive based on a newly calculated safety-net index. Alternatively, some hospitals that provide care to more non-Medicare patients could see a decrease in current add-on payments. MedPAC indicated that calculating add-on payments using the safety-net index would align Medicare funds more directly with hospitals serving low-income Medicare beneficiaries. Commissioners were supportive of moving forward to develop a draft recommendation for this proposal. However, universally, commissioners voiced concerns about potential adverse impacts of the proposal, including the closure of some hospitals that may serve a large volume of non-Medicare beneficiaries and/or hospitals that provide services not found in other hospitals, such as trauma centers and burn units.

    Options for Increasing Medicare Payment for Primary Care

    Policy options for increasing Medicare payments to primary care clinicians were presented by MedPAC staff, showing that the number of primary care physicians (PCP) has declined while the number of specialists has increased. This decline is attributed in part to the fact that PCPs receive lower compensation than specialists due to the undervaluation of evaluation and management (E/M) services over time. MedPAC staff offered two potential recommendations to improve payment for primary care services. Option one is to create two separate fee schedules, one for E/M services and one for non-E/M services. Each fee schedule would have its own conversion factor. Option two is to establish a new per-beneficiary payment for primary care clinicians. Payment would need to be large enough to meaningfully reduce compensation disparities.

    Commissioners overwhelmingly agreed that primary care plays an important role in the health care system and that the shortage of primary care physicians is a critical issue that needs to be addressed. Commissioners had differing opinions on how to address the issue. In this discussion they covered several topics including attrition, protection of PCP in an E/M system, quality, improving primary care, promoting a shift to alternative payment models, student loans, and prior authorization, to name a few.

    Differences in Quality Measure Results Across Medicare Populations

    MedPAC staff presented on performance differences across five Commission-designed, claims-based quality measures grouped by race/ethnicity and income levels for Medicare FFS patients in recognition of the importance of social drivers for health outcomes. Staff found that rates of hospitalizations and emergency department visits for certain ambulatory-case sensitive conditions were higher for all patients with a Part D Low Income Subsidy (LIS), regardless of race or ethnicity, compared to non-LIS patients, but worse for Black patients compared to other racial or ethnic groups regardless of LIS distinctions. In addition, they found that differences in performance were generally worse for all LIS patients compared to non-LIS, with less variation by race or ethnicity on measures of hospital readmissions and successful discharge to the community from skilled nursing facilities and home health post-acute care settings.

    Commissioners discussed concerns with reliability of race and ethnicity data, limits of analysis without the inclusion of Medicare Advantage patients, inability to assess geographic variation (like rural versus urban performance differences), and the quality of the underlying metrics. Some commissioners noted that greater variation in the ambulatory-care sensitive measures could be expanded to better identify and link to primary care relationships and whether such care patterns have an impact on performance differences.

    Regarding next steps, Commissioners largely agreed that while there is great enthusiasm for this work, there is a need to carefully assess analytic questions to best inform the commission’s relevant policy work. The commission does not plan to discuss this topic again in the 2022-23 public meeting cycle.