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MedPAC Discusses HOPD Payments and Hospital Readmissions Reduction Program, Makes No Recommendations

March 8, 2013—The Medicare Payment Advisory Commission (MedPAC) convened March 6 to continue discussions on hospital outpatient department payments (HOPD) as well as the hospital readmissions reduction program. MedPAC made no formal recommendations for either issue, but will include related chapters in its June report to Congress.

As part of a continued examination of reducing payments so they are consistent across service sites, commission staff presented its current analysis of 66 ambulatory payment classifications (APCs) that meet a previously defined criteria [see Washington Highlights, Oct. 5, 2012]. Of the 66 APCs analyzed, three were cardiac imaging APCs (269, 270, 377) whose payment could be reduced to that of physician offices, and 12 were APCs whose payment could be reduced to that of ambulatory surgery centers (ASCs). MedPAC previously issued a formal recommendation to equalize payments to HOPDs for evaluation and management (E/M) services [see Washington Highlights, March 23, 2012].

According to the MedPAC analysis, reducing payment for the 66 APCs would result in major teaching hospitals seeing their overall Medicare revenue decline 0.5 percent. Combined with E/M cuts, major teaching hospitals would see a 1.7 percent reduction in overall revenue and a 5.4 percent reduction in outpatient department revenue.

Commissioners previously have expressed concern regarding the impact these reductions will have on access to ambulatory services by low-income patients. For this reason, MedPAC staff introduced a possible stop-loss policy that could be implemented. For purposes of this analysis, they used the example of limiting losses to 2 percent of overall revenue for hospitals that have a disproportionate share (DSH) percentage greater than 25.6 percent. With the stop-loss in place and combining the cuts to 66 APCs and E/M services, major teaching hospitals would see a decline of 1.3 percent in overall Medicare revenue.

MedPAC’s analysis of the three cardiac imaging APCs showed major teaching hospitals would see overall Medicare revenue decline by 0.3 percent and a decline of 1.4 percent if combined with E/M cuts. Implementing the stop-loss policy would lower the reduction to 1.1 percent.

Commissioners were generally supportive of the findings and encouraged MedPAC staff to continue moving forward with their examination of equalizing payments across settings. However, multiple commissioners expressed concern over the potential effects on rural hospitals as well as the effects on access to services by low-income patients (dual-eligibles).

AAMC Chief Health Care Officer Joanne Conroy, M.D., offered public comments in which she emphasized the harm these cuts would have on low-income, disabled, and dual-eligible patients who disproportionately receive ambulatory care in hospital outpatient environments. In many cases, these patients have nowhere else to receive care.

The meetings also featured a discussion on the Medicare Readmissions Reduction Program. Authorized under the Affordable Care Act (ACA, P.L. 111-148 and P.L. 111-152), the program levies penalties on hospitals with excess readmissions starting October 2012.  Readmissions are measured for three conditions: acute myocardial infarction, pneumonia, and heart failure, but the number of conditions will expand in future years.

Staff reported that hospitals have been focusing on reducing the number of readmissions, which has led to a 0.7 percentage point decline in the risk adjusted all-condition potentially preventable readmissions reduced between 2009 and 2011.

The commissioners discussed four concerns with the program:

  • Small sample size makes it difficult to determine performance difference from random variation;
  • The total penalty does not change, even when the readmission rates improve;
  • Socio-economic status (SES) is related to readmissions. Hospitals with higher levels of low-income patients generally have higher readmission rates; and
  • Mortality and readmissions rates may be inversely related for heart failure.

MedPAC staff identified some refinements that could address these concerns: including moving from condition-specific readmission measures to a broader all-condition readmission measure, calculating the penalty using a fixed-rate threshold based on historical trends, and measuring hospitals within cohorts based on the number of low-income patients they treat. Staff also noted that any change to the readmission formula would require legislative changes.

Many commissioners supported the refinements, although a few questioned the best way to incorporate the SES measurement. Additionally, some commissioners questioned how many resources should be devoted to readmission when new payment models, such as bundled payments and accountable care organizations, also provide incentives to coordinate care and reduce readmissions.


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