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  • Washington Highlights

    MedPAC Votes on Updates to Hospital Base Payment Rates and Physician Payments


    Andrew Amari, Hospital Policy and Regulatory Specialist
    Phoebe Ramsey, Director, Physician Payment & Quality
    Ki Stewart, Senior Policy and Regulatory Analyst

    The Medicare Payment Advisory Commission (MedPAC) met on Jan. 13-14 to discuss and vote on the commission’s draft recommendations to update base payment rates for inpatient and outpatient hospital services, as well as physician payments, and to discuss a mandated report on designing a post-acute value incentive program (VIP), among other topics.

    Hospital Payment Updates

    MedPAC staff members presented updates on payment adequacy for inpatient and outpatient hospital services across four key indicators: beneficiary access to care, quality, hospital access to capital, and Medicare payments compared to hospital costs, which were discussed in a previous meeting [refer to Washington Highlights, Dec. 10, 2021]. Staff reiterated that, using the most recently available data (from 2020), payment adequacy across these indicators is generally positive. However, staff noted that since MedPAC’s December update, Congress extended its suspension of the 2% Medicare sequester through March 31, 2022, and the Department of Health and Human Services began distributing $9 billion in Provider Relief Fund Phase 4 payments. Still, MedPAC’s projected 2022 Medicare margins remain unchanged (-10% for inpatient prospective payment system hospitals).

    For both inpatient and outpatient payments, commission staff reaffirmed that it did not anticipate any long-term changes that would affect payment adequacy beyond the COVID-19 public health emergency (PHE). The staff maintained that highly variable COVID-19 effects would best be addressed through targeted, temporary funding policies rather than changes to the base payment rate.

    Commissioners unanimously voted to approve a draft recommendation for inclusion in MedPAC’s March 2022 Report: that for fiscal year (FY) 2023, Congress should update the 2022 Medicare base payment rate for acute care hospitals by the amount determined under current law, which presently provides for a 2% update. Although commissioners unanimously supported the draft recommendation, they reiterated several concerns, including the need to monitor ongoing supply chain and staffing issues that may impact payment adequacy and persist beyond the end of the PHE. Additionally, commissioners were concerned that these issues may not be adequately reflected in the FY 2023 market basket update, which the commission will monitor throughout the year.

    Physician Payment Updates

    A draft recommendation to update the payment rate for physician and other health professional services in 2023 was also discussed and voted on at the two-day meeting. MedPAC assesses adequacy of Medicare physician payment by examining data in three areas: access to care, quality of care clinicians provide to beneficiaries, and clinicians’ revenue and cost.

    The commission found that most patients report access to care comparable to the privately insured and to prior years, and the number of clinicians billing Medicare is stable. The number of clinician encounters per beneficiary decreased in 2020; however, MedPAC attributed the decrease to the ongoing PHE. For quality of care, the commission noted that patient experience scores remain high. However, quality measures in 2020 are difficult to interpret because of the unique challenges caused by the pandemic. MedPAC staff stated that Medicare payments to clinicians declined by $9 billion from 2019 to 2020, but clinicians received billions of dollars in relief assistance to offset financial losses due to the pandemic.

    Based on this information, in a unanimous vote, MedPAC approved a recommendation for inclusion in its March 2022 Report that Congress should update the 2022 Medicare payment rate for physician and other health professional services by the amount determined under current law, which presently provides for a 0% increase in calendar year 2023. The commission does not expect its recommendation to impact beneficiaries' access to care or clinicians' willingness and ability to furnish care. MedPAC commissioners did, however, raise concerns about physician well-being and the impact of inflation on physician practices.

    Post-Acute Care (PAC) Value Incentive Program (VIP)

    MedPAC staff presented findings for a mandated report on designing a value-based purchasing program under a potential future unified PAC prospective payment system (PPS). Congress mandated this report as part of the Consolidated Appropriations Act, 2021(CAA, P.L. 116-260). A chapter will be included in the forthcoming March 2022 report to Congress.

    The PAC VIP would include five primary design elements: (1) a small set of performance measures, (2) strategies to ensure reliable results, (3) a system to distribute rewards with minimal “cliff” effects, (4) an approach to accounting for differences in patients’ health-related social needs, and (5) a method to distribute a provider-funded pool of dollars. MedPAC staff included illustrative models of each design element in their presentation for commissioners’ consideration.

    The commissioners expressed interest in further evaluation of a different approach accounting for health-related social needs in broader risk adjustment as a final step to a PAC VIP, after completion of implementing the conceptual unified PAC PPS. This was in response to challenges demonstrated by MedPAC staff highlighting different empirical associations to quality performance by PAC setting using the same peer grouping approach for accounting for social risk.