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Second Opinion

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

Washington Highlights

Ways and Means Members Introduce Bills to Reform Medicare Hospital Payments

July 31, 2015 —Members of the House Ways and Means Committee July 29 introduced three bills to reform Medicare hospital payments. The bills, which would likely become part of a larger hospital bill the committee would consider in the fall, were released shortly after two recent Health Subcommittee hearings focused on various Medicare hospital payment issues [see related story].

The three bills would drastically reform Medicare indirect graduate medical education (IME) payments, create a site neutral payment policy for certain inpatient and outpatient surgeries, and redesign disproportionate share hospital (DSH) payments.

The Medicare IME Pool Act of 2015 (H.R. 3292) introduced by Health Subcommittee Chair Kevin Brady (R-Texas), would fundamentally change Medicare IME payments by decoupling IME from hospital discharges and instead providing standardized lump-sum payments to teaching hospitals. This approach would also disregard the intent of such payments to help offset costs related to the unique missions of teaching hospitals and the care they provide to complex patient populations.

The bill creates a new formula that redistributes IME funding across hospitals in a “lump-sum, bi-monthly basis.” A newly created “IME pool” will be initially funded at $9.5 billion for fiscal year (FY) 2019 and available to each hospital at a flat amount, regardless of how many Medicare patients are treated, intensity of GME training, or availability of continuous specialized services.

Committee Chair Paul Ryan (R-Wis.) introduced The Medicare Crosswalk Hospital Code Development Act of 2015 (H.R. 3291), which would lay the groundwork for a new site-neutral payment system. The bill directs the Secretary of Health and Human Services (HHS) to develop a Healthcare Common Procedure Classification System (HCPCS) version of Medicare Severity Diagnosis Related Group (MS-DRG) codes for ten surgeries the Secretary determines to be comparable between the inpatient and outpatient settings.

The “crosswalk” would serve as a guide to compare the inpatient and outpatient payment systems and serve as the basis for site neutral payment reform. The crosswalk is required to be completed no later than Jan. 1, 2018.

Finally, The Strengthening DSH and Medicare Through Subsidy Recapture and Payment Reform Act of 2015 (H.R. 3288), introduced by Health Subcommittee member Rep. Kenny Marchant (R-Texas) and Human Resources Subcommittee Chair Charles Boustany, Jr., M.D. (R-La.), would reform the way Medicare pays hospitals who care for a disproportionate share of uninsured or under-insured patients.

The bill creates a new empirically justified DSH pool, annually funded at $3.3 billion, and reimburses DSH hospitals through “lump sum payments” rather than the current add-on payment structure, beginning in FY 2017. The bill also creates an additional DSH payment for qualifying inpatient prospective payment system (IPPS) hospitals located in states that have not expanded Medicaid under the Affordable Care Act (ACA, P.L. 111-148 and P.L. 111-152).

To offset the cost of the legislation, H.R. 3288 authorizes the Internal Revenue Service (IRS) to “recapture” 100 percent of improperly paid subsidies used to purchase insurance on the federal health care exchange.

Contact:

Len Marquez
Director, Government Relations
Telephone: 202-862-6281
Email: lmarquez@aamc.org

Courtney Summers
Senior Legislative Analyst
Telephone: 202-862-6042
Email: csummers@aamc.org

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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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For More Information

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