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Learn about policy issues important to medical schools and teaching hospitals, with Executive Vice President Atul Grover, M.D., Ph.D.

Washington Highlights

MedPAC Releases June 2015 Report to Congress

June 19, 2015The Medicare Payment Advisory Commission (MedPAC) June 15 released its June 2015 Report to the Congress on Medicare Payment Policy. The report includes chapters on: hospital short-stay policy issues, synchronizing Medicare policy across payment models, Part B payment policy issues, and next steps in measuring quality of care in Medicare.

Hospital Short Stay Policy Issues

Regarding hospital short stay policy issues, MedPAC makes several recommendations to payment for short inpatient hospital stays, greater use of observation stays, recovery audit contractor (RAC) targeting of short inpatient stays, and large backlogs in the appeals process. MedPAC recommends that the Secretary of the Department of Health and Human Services (HHS) should:

  • Direct RACs to focus on reviews of short inpatient stays on hospitals with the highest rates of this type of stay;
  • Modify each RAC’s contingency fees to be based, in part, on its claim denial overturn rate;
  • Ensure that the RAC look-back period is shorter than the Medicare rebilling period for short inpatient stays; and
  • Withdraw the “two-midnight” rule.

With respect to the first recommendation, the commission’s report notes that “a policy designed to identify high use hospitals would need to incorporate a risk adjustment methodology because variation likely exists in the mix of hospitals’ short stay cases.”

MedPAC also recommends that the HHS Secretary should evaluate a penalty for hospitals with excess rates of short inpatient stays, to substitute, in whole or in part, for RAC review of short inpatient stays. The commission acknowledges that a negative consequence associated with this approach is that such a formula based measure may not be capable of differentiating between appropriate and inappropriate short stays.

To address some of the beneficiary liability concerns related to short stay policy issues, MedPAC recommends that Congress should revise the skilled nursing facility (SNF) three-inpatient-day hospital eligibility requirement to allow up to two outpatient observation days to count toward meeting the requirement. Additionally, Congress should require acute-care hospitals to notify patients of their observation status if it lasts more than 24 hours and they are expected to need SNF services.

The notification should make patients aware that their observation status may affect their financial liability for SNF services and should allow them to consult with their physician and other health professionals before discharge planning is complete. Finally, MedPAC recommends that Congress should package payment for self-administered drugs provided during outpatient observation on a budget neutral basis within the hospital outpatient prospective payments system (OPPS).

Next Steps in Measuring Quality

The report continues the commission’s evaluation of alternatives to Medicare’s current system for quality measurement, including using a small set of population based outcome measures to assess quality in a local area under Medicare’s three payment systems: traditional fee-for-service (FFS), Medicare Advantage (MA), and accountable care organizations (ACOs).   

MedPAC explores two population-based measure concepts that could potentially be used to assess quality in a local area: a “healthy days at home” (HDAH) measure and a health-related quality of life measure, such as patient-reported outcomes. MedPAC cites positive preliminary findings suggesting that the HDAH measure could be used to detect differences in relative health status across populations. However, the commission determines that additional analysis, including an appropriate risk-adjustment, is necessary for this measure before it is used to make comparisons between geographic areas or accountable entities.

Synchronizing Medicare Policy across Payment Models

The report reiterates the commission’s belief to synchronize payment rules and quality measures across all three payment models to avoid paying one model more than others for the same or lower quality care. MedPAC presents evidence that no one model is the least costly in all markets.

The chapter focuses on beneficiaries’ Part B premiums as an area to set payment rules that reward the most efficient model of care in each market and incentivize beneficiaries to select that model. MedPAC evaluates illustrative examples for calculating premiums and considers how each example could affect beneficiary premium and program payments for different models and markets. These examples allow comparisons between a nationally set base premium versus a locally set base premium; and paying for FFS Medicare only versus paying for the less costly of FFS Medicare or the reference MA plan in each market.

The June 2015 Report also includes chapters on the next generation of Medicare beneficiaries; value-based incentives for managing Part B drug use; polypharmacy and opioid use among Medicare Part D enrollees;  and sharing risk in Medicare Part D.

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For More Information

Jason Kleinman
Sr. Legislative Analyst, Govt. Relations
Telephone: 202-903-0806
Email: jkleinman@aamc.org