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MedPAC Votes to Phase in Reductions to E/M Services in Hospital Outpatient Departments

January 13, 2012—AAMC President and CEO Darrell G. Kirch, M.D., warned of “unintended consequences” after the Medicare Payment Advisory Commission (MedPAC) Jan. 12 voted to approve a recommendation to reduce payment rates for evaluation and management (E/M) services performed in hospital outpatient departments (HOPDs) to the level of payments for services provided in free-standing physician office settings.  A draft version of the recommendation originally was presented at the December 2011 MedPAC meeting [see Washington Highlights, Dec. 16, 2011]; the final recommendation voted on by the commission contains a three-year phase-in period for the policy and a stop loss.

The recommendation states that Congress should direct the Secretary of Health and Human Services to reduce payments for E/M outpatient office visits provided in HOPDs so that total payment rates are the same whether the service is provided in an HOPD or in a physician’s office.  These changes should be phased in over three years.  During the phase-in, payment reductions to hospitals with a disproportionate share patient percentage at or above the median would be limited to 2 percent of overall Medicare payments.  The MedPAC staff presentation noted that this “stop-loss” of 2 percent affects hospitals with a disproportionate share percentage of 0.25 or higher, which applies to only 17 hospitals in the first year, 44 in the second year, and 120 in the third year.

The draft recommendation was modified from the original December proposal to include a phase-in period because of concerns about the transition for hospitals that are critical sources of primary care for low-income patients.  This concern was raised both by a number of commissioners as well as by organizations such as the AAMC, both in public comment in December and in the association’s Jan. 9 letter to MedPAC.

In a statement immediately following the vote, Dr. Kirch indicated that the “recommendation disproportionately impacts the nation’s major teaching hospitals and will create unintended consequences for both patients and resident education.” Dr. Kirch also noted that “[t]eaching hospital outpatient departments that depend on this support provide essential, coordinated care for patients with complex medical needs in settings such as pain centers and cancer clinics,” and that “[t]hese patients often cannot find care elsewhere in the community.” He continued, “We urge Congress not to make changes to these Medicare payment policies because they will impede access to care in outpatient clinics and affect training opportunities for residents and other health care professionals.”

Accompanying the recommendation to reduce HOPD rates, the commission voted to approve a recommendation that the HHS secretary should conduct a study by January 2015 to examine whether access for low-income patients would be impaired by reduced rates for E/M services in HOPDs.

MedPAC Chair Glenn Hackbarth, J.D., emphasized that Medicare needs to move to paying the same amount across provider settings.  Both Hackbarth and other commissioners noted that the E/M recommendation ties into a larger discussion of the adequacy of E/M payments in the physician fee schedule.  Also, a few commissioners continued to note concerns about beneficiary access, particularly in areas where there are few private physician practices.

Two commissioners, Herb Kuhn and George Miller, M.H.S.A., opposed the recommendation to reduce HOPD payments rates, while Mitra Behroozi, J.D., abstained from voting. Commissioners unanimously approved the recommendation to conduct a study regarding the impact on beneficiary access as a result of this change in payment rates.

Staff presentations and the meeting transcript can be found on MedPAC’s website.


Jane Eilbacher
Policy and Regulatory Specialist
Telephone: 202-828-0896


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