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MedPAC Releases March 2012 Report to Congress With Recommendations on SGR and HOPDs

March 23, 2012—The Medicare Payment Advisory Commission (MedPAC or the commission) March 15 released its March Report to Congress detailing the commission’s analyses of payment adequacy in fee-for-service (FFS) Medicare, Medicare Advantage and Part D, as well as the commission’s assessment of the sustainable growth rate (SGR) system for physician payment.  MedPAC commissioners voted on the recommendations in January, including a recommendation to reduce payments for evaluation and management (E/M) services provided in hospital outpatient departments [see Washington Highlights, Jan. 13] to the same level of services provided in physician offices.  MedPAC’s recommendations related to the SGR were included in an October 2011 letter to Congress.

In a press release, MedPAC Chair Glenn Hackbarth, J.D., said, “This report recommends steps toward one of the Commission’s goals for the Medicare program—to make Medicare a prudent purchaser of health care services, while ensuring access to high-quality care for Medicare beneficiaries.” 

A significant recommendation for hospitals states that Congress should direct the Secretary of Health and Human Services (HHS) to reduce payments for E/M outpatient office visits provided in hospital outpatient departments (HOPDs) so that total payment rates are the same whether the service is provided in an HOPD or in a physician’s office. According to MedPAC, this change 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 a reduction of 2 percent of overall Medicare payments.  Accompanying the recommendation to reduce HOPD rates, the commission recommends 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 also recommends a 1.0 percent increase to the inpatient and outpatient prospective payment systems and that beginning in 2013, the HHS secretary use the difference between the increase under current law (projected to be 2.9 percent) and the commission’s recommended update (1.0 percent) to gradually recover past overpayments due to documentation and coding changes.

In this report, MedPAC recommends repealing the SGR and replacing it with a 10-year path of statutory fee-schedule updates.   This path is comprised of a freeze in current payment levels for primary care and, for all other services, annual payment reductions of 5.9 percent for three years, followed by a freeze. The commission is offering a list of options [see Washington Highlights, Sept. 23, 2011] for the Congress to consider if it decides to offset the cost of repealing the SGR system within the Medicare program.

The report includes three other recommendations related to payment of physicians and other health professionals. Two focus on improving the accuracy of the physician fee schedule through better data collection and identifying overpriced services. The final recommendation uses financial incentives to encourage physicians and other health professionals to participate in accountable care organizations (ACOs).


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


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Jason Kleinman
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Telephone: 202-903-0806