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MedPAC Hones in on Hospital Doctor Pay Disparity

By Kerry Young, CQ Roll Call

November 3, 2016 -- An influential federal advisory panel on Thursday discussed ways to adjust Medicare policies so hospital-owned practices are not paid more than independent practices.

Medicare's "current policies have been a major contributor to the degree to which hospitals are employing physicians," said Paul Ginsburg, a member of the Medicare Payment Advisory Commission (MedPAC) and a researcher at the Brookings Institution, at Thursday's meeting. "It's a trend that really concerns me."

MedPAC has for several years been calling attention to the cascading effects of hospitals' acquisitions of physician practices. The giant federal health program pays more for similar or identical care when hospitals own doctors' offices because hospitals can bill for services under Medicare's outpatient rules, while independent practices rely on Medicare's less lucrative physician fee payments.

"We often hear that physicians' productivity falls when they become part of a hospital," Ginsburg said, adding that the acquisition of doctors' practices often is driven by an interest in boosting business and not necessarily to improve the quality of care or lower costs.

MedPAC members and staff noted both the immediate cost and long-term effects of having two payment policies cover the same kinds of care. The Congressional Budget Office last year said blocking higher hospital payment rates for many new off-campus departments through last year's budget deal (PL 114-74) could save $9.3 billion over a decade.

Medicare in a single year, 2015, paid $1.6 billion more for certain services, known as evaluation and management, because the practices providing them were owned by hospitals, MedPAC analyst Jeff Stensland on Thursday told the panel. In his presentation, Stensland noted concerns about hospitals seeking to game the system to boost their payments. He did not elaborate.

MedPAC members seemed unimpressed with a step that Congress took last year to reduce hospitals' incentive to continue to acquire doctors' practices. The Centers for Medicare and Medicaid Services on Tuesday unveiled its initial plan for implementing a mandate of last year's budget deal. It cuts off the higher pay for many off-campus physician offices that hospitals may open in the future. Satellite physician offices that were running when the law took effect can continue to collect Medicare's higher outpatient pay, instead of the lower reimbursement rates for physicians.

"I don't think what Congress did late last year was really that much compared to what the commission worked out before as policy recommendations," Ginsburg said. "I'd like to see us get back to that" topic.

MedPAC in 2014 recommended reducing or eliminating differences in payment rates between outpatient departments and physician offices for many services. The panel staff and members on Thursday indicated strong continued support for this direction.

MedPAC could touch on some of these themes next month as it crafts detailed suggestions addressing the 2018 payment rates for hospitals and a wide variety of health services. The panel tends to vote on specific recommendations in January for a March report to Congress.

MedPAC also present Congress with reports in June that examine broader trends and issues for Medicare. Aspects of the Thursday discussion on consolidation might be contenders for a future June MedPAC report.

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