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MedPAC Releases March 2014 Report to Congress

March 21, 2014— The Medicare Payment Advisory Commission (MedPAC) released its March 2014 Report to the Congress: Medicare Payment Policy. The report includes MedPAC’s analyses of payment adequacy in fee-for-service (FFS) Medicare and Medicare Advantage (MA), and provides information on the Medicare Part D prescription drug benefit.

The report includes MedPAC’s recommended 2015 rate adjustments for Medicare’s various fee-for-service (FFS) payments systems.  MedPAC recommends a 3.25 percent update to pre-sequestration payment rates for inpatient and outpatient hospitals accompanied by two changes that would implement site neutral payments between settings.

First, MedPAC recommends reducing hospital payments for 66 ambulatory payment classifications (APCs), mainly for imaging and tests, to make payments for these services more similar to the rates paid in the physician fee schedule.

Second, the commission recommends paying long-term care hospitals (LTCHs) a rate equivalent to what an acute care hospital would otherwise be paid to care for a patient, unless the patient’s illness could be characterized as chronically critically ill (CCI).  Reductions in spending derived from paying LTCHs a lower rate for non-CCI patients could be used to fund an outlier pool for acute care hospitals that treat CCI patients.

MedPAC recommends that the following five FFS payment systems not receive a payment update in 2015: ambulatory surgical centers, outpatient dialysis, long term care hospitals, inpatient rehabilitation facilities, and hospice.

For physician services, MedPAC repeats its previous recommendation to repeal the sustainable growth rate (SGR) formula and replace it with a 10-year path of statutory fee schedule updates.  The path would include a payment rate update that is higher for primary care services than for specialty services to decrease the differential between primary care payments and payments to specialists.  The commission also reiterated its 2011 recommendation to direct the Secretary of Health and Human Services (HHS) to increase the shared savings opportunity for physicians and health professionals who join or lead two-sided risk accountable care organizations (ACOs).

The report also recommends a three-year data collection from a cohort of efficient practices that would include information on service volume and work time to establish more accurate work and practice expense values.  The goals of the data collection would be to assess the adequacy of Medicare’s fees for efficient care delivery and to help identify overpriced fee-schedule services and reduce their relative value units (RVUs) accordingly.



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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