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Washington Highlights

MedPAC Continues Discussion on Reductions to Hospital Outpatient Payments

November 16, 2012—The Medicare Payment Advisory Commission (MedPAC) Nov. 1 and 2 met to discuss topics including reducing payments for certain services provided in hospital outpatient departments (HOPD) to the same level as services provided in physician offices. In its March 2012 report, the commission recommended reducing payments for evaluation and management (E/M) services provided in hospital outpatient departments [see Washington Highlights, March 23].  The commission is now considering whether to recommend that payments for other services be reduced as well.

During the October meeting, the commission discussed 86 ambulatory payment classifications (APCs) that met the following criteria:

  • Frequently performed in physicians’ offices (more than 50 percent of the time);
  • Similar unit of payment (ancillaries are less than 5 percent of total cost of service in outpatient system);
  • Infrequently provided in an emergency department (ED) (less than 10 percent); and
  • Minimal difference in patient severity across settings [see Washington Highlights, Oct. 5].

At the November meeting, MedPAC staff presented the commission with additional analyses. The staff now excluded APCs with 90-day global payment periods, reducing the total number of APCs at issue to 71. MedPAC estimates Medicare spending would decrease by $1.0 billion if reductions were made to these 71 APCs. According to staff estimates, the average hospital would see its overall Medicare revenue decline by 0.6 percent, and its outpatient department revenue would decline by 2.8 percent.  If reductions in payment for these 71 APCs were combined with cuts to E/M services, the average hospital would face a projected 1.2 percent reduction in total Medicare revenue, and its outpatient department revenue would decline by 5.5 percent. Under a combined recommendation, major teaching hospitals would face an approximately 1.7 percent reduction in total Medicare revenue.

Many commissioners supported the principle behind “equalizing payments” across settings. However, several voiced concerns on the potential adverse effects on teaching hospitals that rely on Medicare revenues to support their missions of meeting the patient access needs of their communities and training the next generation of physicians.

The AAMC made a public comment requesting that the commission release the full list of APCs being considered for cuts, as well as the logic the MedPAC staff used to arrive at the 71 proposed APCs.  The AAMC also urged the commission to adopt a policy that protects access to ambulatory care services for needy populations.


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Washington Highlights, a weekly electronic newsletter, features brief updates on the latest legislative and regulatory activities affecting medical schools and teaching hospitals.

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Jason Kleinman
Sr. Legislative Analyst, Govt. Relations
Telephone: 202-903-0806