Healthcare Business News

MedPAC sees hefty savings in 'site-neutral' payment policy

By Rich Daly
Posted: June 14, 2013 - 3:15 pm ET

Expanding cuts to hospitals' outpatient services is among the leading Medicare cost-reduction proposals gaining interest from Congress.

The Medicare Payment Advisory Commission recommended in March 2012 that Medicare should equalize evaluation and management office visit payment rates, regardless of whether they occur in a hospital outpatient setting or a physician's office, which would save up to $1 billion a year.

Congress' board of Medicare experts followed that up Friday with a report offering 66 other ambulatory payment areas where such a “site-neutral” policy could be used to derive $900 million in additional annual savings (PDF).

“We have a real interest in that area,” Rep. Kevin Brady (R-Texas), chairman of the Ways and Means Health Subcommittee, said in seeking more information about site-neutral proposals at a Friday hearing on Medicare.

MedPAC's site-neutral changes would derive $500 million of their projected annual savings from three groups of cardiac imaging services. The MedPAC report noted that the use of such imaging among Medicare beneficiaries has shifted from office settings to hospital outpatient departments as hospitals have increased their employment of cardiologists.

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Mark Miller, executive director of MedPAC, testified to the subcommittee that the higher hospital-based payment for such services was not justified by higher provider costs and was causing unintended consequences.

“We think that payment has stimulated purchases of physician practices, for example,” he said.

The proposals have drawn strong opposition from hospital groups.

Richard Pollack, executive vice president for the American Hospital Association, wrote MedPAC in March to urge it to drop the site-neutral proposals from its June report to Congress.

“Including a chapter in the June report, even with appropriate 'context' and even without any recommendations, could absolutely be used to justify congressional site-neutral payment reductions to hospitals, despite assertions otherwise,” Pollack wrote.

The hospital trade group estimated that the total site-neutral changes would cost hospitals over $2 billion annually and increase hospitals' Medicare outpatient losses from 11% to 17%.

An AHA official responded to the report Friday by calling inclusion of the site-neutral provisions “premature and ill-advised.”

“Given the complexity involved in crafting a site-neutral payment policy, the AHA believes that a more robust analysis of impact should have been conducted before this issue was committed to a published chapter,” said Marie Watteau, an AHA spokeswoman.

MedPAC's annual June report on Medicare payment systems stated that the change was needed to counter a trend that has driven higher program spending with no greater patient benefit. Examples of that growth noted in the report included a 9% increase from 2010 to 2011 in the share of evaluation and management office visits provided in hospital settings and a 22% increase in the share of nuclear cardiology tests in those locations.

Other MedPAC recommendations at the hearing focused on post-acute care changes received a frostier reception.

For instance, the development of a common assessment tool of patients' health status across care settings, which MedPAC first recommended in 2005, was criticized by Rep. Tom Price (R-Ga.), a physician, for carrying unaccounted for provider costs.

Jonathan Blum, director of the Center of Medicare at the CMS, testified that the patient instrument, which his agency is developing, could reduce compliance costs through standardization for large entities that own several types of providers. Although the CMS continues to calibrate the “care tool,” Blum said, the agency plans to deploy it for the first time through its payment-innovation pilot projects.

Other high-profile provisions of MedPAC's new report included an endorsement of the recently implemented hospital readmissions

penalty program, with some tweaks. Among the changes sought by MedPAC is the establishment of a fixed, rather than relative, target for readmission rates. That change would allow penalties to decline when industry performance improves, instead of the current system that allows penalties to continue despite industrywide improvement in readmission rates.

Also released Friday was the Medicaid and CHIP Payment and Access Commission's June report to Congress, which outlined potential saving from further reducing the rate of cesarean section deliveries. Almost one-third of Medicaid-funded deliveries were through cesarean section, which cost more than vaginal deliveries and were associated with more adverse outcomes, according to the report. The report detailed a variety of federal and private programs to reduce elective cesarean sections and non-medically indicated induced deliveries before 39 weeks gestation.

The report also noted that the Medicaid primary-care provider pay boost “has proven difficult to operationalize,” as has been widely reported. The commission concluded from a series of interviews that several factors were behind a delay in many states of a two-year bonus payment for primary care providers authorized by the Patient Protection and Affordable Care Act.

Follow Rich Daly on Twitter: @MHrdaly

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