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MedPAC Finalizes Recommendation to Increase Hospital Inpatient and Outpatient Payments

January 11, 2013—The Medicare Payment Advisory Commission (MedPAC) Jan. 10 met to finalize recommendations regarding 2014 payments for hospital inpatient and outpatient services and physician and ambulatory surgical center (ASCs) services. These recommendations will be included in MedPAC’s annual March report to Congress on Medicare payment policy.

The commission voted unanimously to recommend a 1 percent increase to fiscal year (FY) 2014 inpatient payments and calendar year (CY) 2014 outpatient rates. This was the only recommendation for hospital inpatient and outpatient services. The recommendation is 0.80 percent less than the statutory update for inpatient services, to allow the Department of Health and Human Services to recoup past overpayments to hospitals based on documentation and coding adjustments [see Washington Highlights, Dec 7, 2012].

The commission did not change its proposed recommendation in light of the American Taxpayer Relief Act of 2012 (ATRA, P.L. 112-240), which was signed into law on Jan. 2 [see Washington Highlights, Jan 4]. The law included $11 billion in documentation and coding offsets to help pay for a one-year patch to the sustainable growth rate (SGR) formula and avert a 26.5 percent reduction for physician services. The commissioners reiterated that the payment increase should occur regardless of these documentation and coding offsets and regardless of cuts from sequestration, which were delayed for 2 months under the ATRA.

Hospital association representatives provided public comments in support of the increase. AAMC Director of Hospital and GME Payment Policies Lori Mihalich-Levin, J.D., asked the commission to clearly state in its March report the intent of the recommendation, as it intersects with sequestration and the documentation and coding offsets included in the fiscal cliff legislation.

All commissioners continued to express that the time to deal with the repeal and replacement of SGR is now. MedPAC Chair Glenn Hackbarth, J.D., called the matter “urgent” and expressed a concern echoed by other commissioners that Congress’s continued failure to replace the SGR may result in access problems for Medicare beneficiaries. In addition, the commission feels replacing SGR at this time (based on its recommended principles for repeal) will create an opportunity to balance payment variations among primary care and specialty physicians, and increase the volume of services delivered in new payment models other than fee-for-service. The commission reaffirmed its previously-recommended principles for replacement of the SGR [see  Washington Highlights, Dec. 7, 2012].

The commission also changed its draft recommendations for ASCs to receive no payment increase for CY 2013.  At the December meeting, commissioners generally were supportive of a payment update of 0.5 percent for CY 2013[see Washington Highlights, Dec. 7, 2012]. The original rationale for the increase was to close the payment gap between ASCs and hospital settings. However, MedPAC felt a lack of payment increase was justified by the continued growth in ASCs as evidence of adequate reimbursement. In addition, the commission was uncomfortable recommending a payment increase in the absence of any data on ASC costs. Commissioners unanimously were supportive of requiring ASCs to submit this data beginning in CY 2014.


Evan Collins, MHA
Specialist, Clinical Operations and Policy
Telephone: 202-828-0552

Scott Wetzel, M.P.P.
Lead, Quality Reporting
Telephone: 202-828-0495


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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