The group that advises Congress on Medicare policy set off a series of reactions last week with its most recent report, which was met with applause on Capitol Hill but was not as well-received by some in the hospital community.
In its semiannual report to Congress, the Medicare Payment Advisory Commission suggested that the CMS base a portion of its payments to Medicare managed-care plans and dialysis facilities on the quality of care they provide.
After the report's release, Sen. Max Baucus (D-Mont.), who played a central role in negotiating Medicare reform, said he planned to introduce legislation that would expand on the law's pay-for-performance provisions.
Under the Medicare law, starting in 2005 hospitals will only receive annual payment increases that match the rate of inflation if they publicly report quality data. MedPAC, which first endorsed the idea of paying hospitals for performance in June 2003, has now concluded that other sectors of the healthcare system would benefit from similar incentives.
"We're getting more concerned about quality issues and Medicare is a good place to start" using financial inducements to reward better care, a Baucus aide said last week. Baucus plans to introduce legislation by the end of this month. Its prospects are uncertain, the aide conceded, but "this is an important issue to get started on."
In its 237-page report, which Congress uses as a guide to develop Medicare and other health policies, MedPAC called for eliminating outlier payments in the outpatient setting. Outlier payments help compensate hospitals for cases in which the cost of care exceeds the DRG payment.
Those payments, MedPAC said, are unnecessary because of several factors, including the low variability in costs for many outpatient services; the system's susceptibility to manipulation by hospitals; distortions created when one hospital outpatient setting is subject to outlier payments and another is not; and the additional complications that arise from outlier payments. Outlier payments for outpatient services represent 2% of Medicare hospital outpatient spending.
The American Hospital Association agrees only partially with MedPAC, arguing that there are some cases where outlier payments are appropriate, said Don May, the AHA's vice president of policy. It would be better to target the outliers to high-cost services than to eliminate the extra payments altogether, he said.
The MedPAC report also concluded that hospitals' access to capital continues to be good, a finding that runs counter to the findings of a series of reports by the Healthcare Financial Management Association and funded by GE Healthcare Financial Services (March 1, p. 4).
The AHA disagreed with MedPAC's assessment of hospitals' capital access. "When one-third of hospitals are operating in the red, those hospitals don't have access to capital," May said.
For fiscal 2004 ending Sept. 30, MedPAC estimates that overall Medicare margins for all hospitals will be 1.8%, up from 1.7% in 2002.
Addressing another sector of the industry, MedPAC endorsed giving skilled-nursing facilities no payment increase in 2005.