The Medicare Payment Advisory Commission on Thursday voted unanimously to recommend hospitals receive a 3.3% raise in 2021.
The CMS has scheduled a 2.8% pay raise to hospitals for inpatient and outpatient services. MedPAC recommended that Congress increase net payments by 3.3% but change the structure of the pay boost to close the gap between reimbursement rates for physician offices and hospital outpatient departments. Commissioners also recommended giving hospitals incentives to reduce mortality and improve patient satisfaction by tying some of their raise to quality improvements.
The advisory panel needs to find a way to make sure that hospitals are more accountable for the total cost of care, said MedPAC Commissioner Dana Safran, head of measurement for Haven, the healthcare venture formed by Amazon, Berkshire Hathaway and JPMorgan Chase.
MedPAC is allowing hospitals "to thrive on fee-for-service revenue," she said.
If Congress followed MedPAC's recommendation, Medicare base payment rates to acute care hospitals would increase by 2%, which is 0.8 percentage points lower than the current plan. That loss would be offset by corresponding financial rewards under the hospital value incentive program. The commission also recommended eliminating current quality penalties, which should increase hospital payments by 0.5%.
Under MedPAC's recommendations, hospital payments would increase by $750 million to $2 billion in 2021 and $5 billion to $10 billion over five years.
The new payment structure wouldn't affect Medicare beneficiaries' access to care or Medicare providers' willingness to deliver care, according to MedPAC's staff. They believe it would also control hospital cost growth, reduce payment differentials across care sites and reward high-performing hospitals.
MedPAC's recommendation represents another nudge toward value-based payment. The updated payment structure would limit the strictly fee-for-service portion of the pay increase, while providing hospitals with additional financial incentives to improve quality.
It could also reduce hospitals' financial incentives to acquire physician groups, which some health systems have done to take advantage of reimbursement differences that are based on the location of care, rather than the type of care provided.
The plan lets hospitals keep "a foot in two canoes," Safran said.
Several commissioners think that MedPAC will need to develop a better long-term solution in order to increase hospitals' responsibility for the total cost of care. It's a project that they'll likely focus on for next year's recommendations.
"I think taking on the question of how hospitals are paid is … essential," said MedPAC Chairman Dr. Francis Crosson, founder of the Permanente Foundation. "I think it's going to be one of the heaviest lifts that this commission has ever attempted."
MedPAC also voted to recommend that Congress maintain the 2020 payment rates for physicians in calendar year 2021. The commission's staff said the recommendation wouldn't affect Medicare spending or access to care because it's consistent with what's already on the books.
There's no planned pay increase for doctors in 2021, but clinicians who participate in the merit-based incentive program should be eligible for a 7% adjustment and an exceptional performance bonus. Physicians who participate in an advanced alternative payment model could receive a 5% incentive payment.
