The Medicare Payment Advisory Commission last week unveiled an aggressive set of recommendations designed to redirect hospital spending away from capital projects and instead funnel it back into patient care and quality improvement costs.
The 17-member congressional advisory board also made recommendations that would rein in Medicare payments to post-acute-care facilities that have, on average, seen double-digit Medicare margins over the past several years.
During meetings held in Washington on Jan. 10 and 11, commissioners said they would advise federal lawmakers to increase physician payments by roughly 3%-or the full marketbasket allotment minus half of the expected productivity growth-in fiscal 2007. They also advised a one-year freeze in payments for skilled-nursing facilities, long-term acute-care hospitals, inpatient rehabilitation centers and home health organizations.
MedPAC said that the recommendation to give the smaller update, if followed, would reduce spending for fiscal 2007 by $50 million to $200 million for outpatient services, and $200 million to $600 million for inpatient services. Over five years, the savings would rise to just less than $1 billion for outpatients and from $1 billion to $5 billion for inpatients.
"There is no right answer to what the right update should be," Glenn Hackbarth, chairman of the commission, said during the first day of the meeting, according to a transcript released Jan. 12. "This is a judgment. It's not ultimately something that you arrive at through careful analysis. Analysis can inform it, but it doesn't lead to a single right answer."
To be sure, the MedPAC recommendations are some of the most fiscally conservative to date, but they're done to mimic the expectations that any other industry would impose on itself to better compete in the marketplace, Hackbarth said. He added, "It is important that we have an expectation of improved productivity for hospitals, and all providers, even when the average margin is negative."
Even while commissioners admit that they're concerned about overall Medicare margins, which at best are razor-thin and at worst in the negative, Hackbarth said the moves are necessary in order to prompt private payers to put more fiscal pressure on hospitals, thus forcing them to rein in cost growth.
As expected, in news releases, e-mails and telephone interviews, association executives railed against the MedPAC findings, which they contend will cut into patient care, quality improvement and even staffing levels by siphoning off approximately $600 million in federal reimbursements.
The American Hospital Association said that any increase that doesn't take into full account overall higher healthcare costs systematically works as a cut. "We're against it because it reflects bad policy," said Carmela Coyle, the AHA's senior vice president for policy.
Those in the post-acute-care industry also decry the MedPAC recommendations. Susan Feeney, senior director for public affairs for the American Health Care Association, said that the association wants MedPAC to focus on margins for the entire sector of long-term and senior-care facilities. She said that about 67% of nursing home residents rely on Medicaid, which "chronically underfunds care" even while those same facilities may earn a positive Medicare margin.
William Walters, chief executive officer of the Acute Long Term Hospital Association, said the lack of extra funds would be damaging to the long-term acute-care industry, which is already under fire by a host of legislative efforts.
The MedPAC recommendations will be released formally in March and the commission will meet again later this year.