Skip to main content

Advanced Search

Advanced Search

Current Filters

Filter your query

Publication Types



Newsletter Article


MedPAC Recommends 1 Percent Hospital Payments Hike

By John Reichard, CQ HealthBeat Editor

January 12, 2012 -- The Medicare Payment Advisory Commission (MedPAC) voted last week to recommend that Medicare payments for hospital inpatient and outpatient care in fiscal 2013 be increased by 1 percent.

The recommendation was one of a series approved at the panel's meeting affecting other types of providers as well.

The commission also voted to recommend that Medicare lower payments to hospital outpatient departments for evaluation and management services so that they are equal to the reimbursements for those services when they are provided in a doctor's office. These rates should be equalized over a three-year period, it added. Examples of an evaluation and management service include when a doctor takes a patient history, makes a referral or orders a test.

The panel said that under the phase-in, hospitals with above average numbers of poor patients should lose no more than 2 percent of their Medicare revenues under the policy—what commissioners called a "stop-loss" provision. The commission also called on the Department of Health and Human Services (HHS) to monitor the impact on low-income patients of the policy.

"The Secretary of HHS should conduct a study by January 2015 to examine whether access to ambulatory physician services for low-income patients would be impaired," says the recommendation agreed to by the commission. "If access will be impaired, the Secretary should recommend actions to protect access," it added.

Commission staff estimated that the stop loss provision would protect a total of 120 hospitals over the three year period. Making evaluation and management rates equal would cut Medicare spending more than $10 billion over five years, staff estimated.

The recommendations on evaluation and management visits have sparked controversy.

The phase-in period and the study proposal represented additions to a draft recommendation on the issue unveiled at the commission's December meeting.

Hospitals Object

Although the changes aimed to address concerns over how the reductions would affect outpatient services at teaching and other facilities treating large populations of the poor, hospital representatives lined up at the microphone during the public comment phase of the commission's meeting to protest the recommendation.

"We are very disappointed," said Ivy Baer of the Association of American Medical Colleges. "We feel by 2015 that it may be too late—that a lot of these clinics may have either closed or already reduced the services that they are providing."

A representative of the National Association of Public Hospitals and Health Systems said the policy would cut $1 billion a year from payments to public facilities.

"These safety-net hospitals serve critical roles for vulnerable populations," the representative said. "They provide primary care and serve as medical homes for the patients. And these patients also have multiple chronic illnesses and mental and behavioral health issues and require more comprehensive services in the outpatient setting that are not available in free standing physician offices."

According to MedPAC projections, the profit margins hospitals have on Medicare patients will drop from a negative 4.5 percent in 2010 to negative seven percent in 2012. The margin figures take both inpatient and outpatient services into account.

Don May, an official with the American Hospital Association, predicted that the cuts for evaluation and management would make it difficult to provide certain basic services. He asked how hospitals will have funding to keep emergency rooms open 24 hours a day, seven days a week.

Some commissioners expressed reservations about the "E & M" proposal. Herb Kuhn, president of the Missouri Hospital Association, voted against it, saying he thought services provided in doctor's offices and those in hospital outpatient departments were "apples and oranges" because of the different types of patients involved. He also voiced worry about the many added insured Americans who would be seeking services under the health law starting in 2014. Mitra Behroozi, a lawyer with the Service Employees International Union in New York City, said she feared clinics could close in that city. And George N. Miller, a health personnel specialist, said he thought protections in the proposal were too weak. But most commissioners went along, saying the panel needs to champion the principle that payment levels for the same service shouldn't vary across different types of treatment settings.

MedPAC recommendations that lead to spending reductions are being snapped up by lawmakers and the administration in the past couple of years. They have figured in Medicare cuts used to cover the uninsured in the health care overhaul law (PL 111-148, PL 111-152), in deficit reduction proposals, and in legislation to patch payment cuts triggered under Medicare's controversial physician payment formula.

The evaluation and management proposal was included in the measure passed by the House in December to block Medicare doctor payment cuts through 2013. The proposal seems likely to get strong consideration once again as a pay-for as lawmakers seek to extend the current two-month physician payment patch that expires at the end of February.

Other recommendations

The commission also agreed to payment recommendations for other sectors of health care at the morning portion of its meeting. It said Congress should update payment rates for ambulatory surgical centers by 0.5 percent in calendar year 2013. Doing so would generate modest savings, cut Medicare spending by less than $1 billion over five years, commission staff said. The commission also voted to recommend that Congress direct HHS to establish a "value-based purchasing" program for ambulatory surgical centers by 2016. Payments would vary according to the quality and efficiency of care.

Another recommendation approved by the commission would increase outpatient dialysis payment rates by one percent in calendar year 2013. And payment rates for hospice care should rise by .5 percent in fiscal 2013, commissioners agreed.

The various recommendations will be submitted to Congress in a report due March 1. Lawmakers often ignore MedPAC recommendations but when they agree with the policy change involved they are quick to cite the panel's backing.

Publication Details