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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 Discusses Report on Accountable Care Organizations, Medicare Part B Payment Policy, and Quality

October 7, 2016—The Medicare Payment Advisory Commission (MedPAC) met Oct. 6-7 to discuss various Medicare issues, including Medicare Part B drug payment policy issues, and reforming quality measurement across payment models.

MedPAC’s first topic of discussion was a Status Report on Medicare Accountable Care Organizations (ACOs). During this session MedPAC staff provided the result of their analysis of ACOs: the Medicare Share Savings Program, Pioneer, and Next Generation Models.  The finding was that ACOS in the south, those that are physician-led, and small ACOs are more likely to exhibit savings.  Statistical analysis by staff showed that the key variable for obtaining savings was relative service use. In other words, those ACOS that initially used the most services had the biggest opportunities for savings as merely using fewer services resulted in savings.  Much discussion also centered around how to account for Part D drug costs in ACOs.  All commissioners agreed that Part D drug expenditures likely present a good opportunity for savings.  Among the challenges related to accounting for Part D are how to measure and benchmark the costs, and whether spending more on drugs may save money on other services, such as emergency department visits and admissions.

The meeting also included a session on Medicare Part B drug payment issues and offered proposals on ways to address growth of drug prices and to modify the current Part B payment formula.  The proposals are as follows:

  • Options that seek to increase price competition and address Part B drug price growth (these were also discussed in the June 2016 report); seek to consolidate drug billing codes (particularly biosimilar and reference products); limit average sales price (ASP) inflation (likely tied to CPI); and, restructure the competitive drug acquisition program (CAP).

  • Options that seek to improve the current payment formula and data collection include modifying the ASP add-on formula; modifying the payment formula for drugs paid under the wholesale acquisition cost (WAC) plus 6 percent; and, strengthening manufacturer reporting for ASP data.

Many of the Commissioners felt that the options would collectively work together to address increasing drug costs in Part D.  Some Commissioners are concerned that consolidating billing codes may limit choices for patients and dampen incentives to grow the burgeoning biosimilars market.  With respect to a restructured competitive acquisition program, Commissioners emphasized that attention should be paid to problems associated with the previous CAP, in particular the absence of a formulary and the administrative burden of requiring providers to order patient-specific meds. 

The Commissioners focused on broad changes to how quality is measured across payment models, which is a continuation of the quality reform discussion first started in June 2014. The Commission has identified a small set of population-based outcomes and patient satisfaction measures for these models, which will be covered in more detail at next month’s meeting. Commissioners highlighted the influence of sociodemographic status factors in these measure results, and the need for appropriate risk adjustment for these measures under a new quality measurement approach.

Commission staff additionally presented on Behavioral Mental Health Care in the Medicare Program, highlighting concerns of national workforce shortages, including psychiatrists, and the lack of bed capacity at state and county owned psychiatric hospitals, thus moving behavioral health treatment to primary care physicians in ambulatory settings. Staff suggested that the Commissioners orient focus future work on improving the payment system for inpatient psychiatric facilities and improving access to ambulatory behavioral health services.

Quality Payments Contact:

Scott Wetzel, M.P.P.
Lead, Quality Reporting
Telephone: 202-828-0495
Email: swetzel@aamc.org

Medicare Part B Contact:

Tanvi Mehta
Physician Payment & Quality Specialist, HCA
Telephone: 202-909-2020
Email: tmehta@aamc.org

Behavioral/Mental Health Contact:

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