MedPAC recommends FY16 hospital payment boost

In its annual recommendations to Congress on Medicare policies, the Medicare Payment Advisory Commission recommends a 3.25 percent update to inpatient and outpatient hospital payment rates for 2016, as well as repeal of the Sustainable Growth Rate (SGR) methodology for physician services.

The Medicare Payment Advisory Commission (MedPAC) has released its annual recommendations to Congress on Medicare policies, including Medicare fee-for-service (FFS) payment updates and a status report on the Medicare Advantage and Medicare Part D programs.

The following are highlights of the recommendations for 2016 (many of which were recommended previously). You can read the entire report, embedded below.

• PHYSICIAN SERVICES: MedPac says Congress should repeal the Sustainable Growth Rate (SGR) methodology for physician services and replace it with a 10-year path of statutory updates that includes a higher rate update for primary care services than for specialty care services (note that Congress may take up SGR reform legislation as early as this month, before the latest temporary patch expires and a 21.2 percent fee schedule cut goes into effect April 1, 2015). In addition, Congress should direct the Department of Health and Human Services (HHS) Secretary to increase shared savings opportunities for physicians and health professionals in two-sided risk accountable care organizations (ACOs). MedPAC also endorsed the collection of data to establish more accurate work and practice expense values, along with reductions to the relative values for overpriced fee-schedule services to reduce fee schedule spending by at least 1 percent annually for each of five consecutive years. Congress also should establish a prospective per beneficiary payment to replace the Primary Care Incentive Payment program (which provides a 10 percent bonus payment for certain primary care practitioner services) after it expires at the end of 2015.
• HOSPITAL PAYMENT RATES: MedPAC recommends a 3.25 percent update to inpatient and outpatient hospital payment rates for 2016, concurrent with changes to the outpatient payment system and the long-term care hospital (LTCH) payment system. Specifically, MedPAC calls on Congress to direct the Secretary to reduce or eliminate differences in payment rates between outpatient departments and physician offices for selected ambulatory payment classifications. Second, MedPAC recommends reducing payment for LTCH services furnished to patients whose illness is not characterized as chronically critically ill (CCI) to the same rate that an acute care hospital would be paid for such care; savings from this provision would fund an outlier pool for acute care hospitals that treat costly CCI patients (this provision would be phased in from 2016 to 2018).
• SKILLED NURSING FACILITIES: Congress should eliminate the skilled nursing facility (SNF) market basket update. Congress also should direct the Secretary to revise the SNF prospective payment system (PPS) to rely on patient characteristics and begin a process of rebasing a year after these revisions are implemented, with an initial reduction of 4 percent and subsequent reductions until Medicare’s payments better align with providers’ costs.
• INPATIENT REHAB FACILITIES: Congress should eliminate the fiscal year 2016 Medicare rate update for inpatient rehabilitation facilities (IRFs) and direct the Secretary to eliminate payment differences between IRFs and SNFs for selected conditions, with IRF payment reductions phased in over 3 years. IRFs also should receive relief from regulations specifying the intensity and mix of services for site-neutral conditions.
• AMBULATORY SURGICAL CENTERS: Congress should eliminate the ambulatory surgical center (ASC) payment update for 2016 and require ASCs to submit cost data.
• HOME HEALTH: Congress should direct teliminate the home health market basket update for 2016, rebase rates, revise the home health case-mix system to rely on patient characteristics to set payment for therapy and nontherapy services, and expand medical review activities and exercise program integrity authorities. In addition, Congress should direct the Secretary to reduce payments to HHAs with relatively high risk-adjusted rates of hospital readmission and establish a per episode copay for home health episodes that are not preceded by hospitalization or post-acute care use.
• OTHER: Congress should eliminate the 2016 update for LTCHs, hospices, and outpatient dialysis services.

While MedPAC’s recommendations are not binding, Congress and CMS often take into account MedPAC’s assessments when updating Medicare payment policies.