MEDICARE:

Battle erupts over MedPAC’s backing of cuts

MEDPAC’S recommendation to equalize rates draws fire

Medicare’s advisory panel recommended a pay hike for most hospital services in 2013, but a separate spending suggestion received much more attention. The Medicare Payment Advisory Commission on Jan. 12 voted 16-1 to support a 1% update for inpatient and outpatient hospital services for 2013. The panel also recommended 14-2 (with one abstention) to phase in over three years a lower hospital outpatient evaluation and management rate to the level provided for such care in physicians’ offices.

The cut was described by supporters as the first significant step in an ongoing effort to equalize Medicare payments for the same service by different providers.

Glenn Hackbarth, chairman of MEDPAC, said health policy experts have long lamented Medicare’s tradition of different pay for the same healthcare services in different locations, which he blamed on long-standing “silos” separating different providers. The recommended pay equalization, he said, is a gradual way to knock down those silos.

Hospital advocates roundly challenged the pay equalization as likely to limit care and restrict provider integration, among other negative effects.

“While a 3% cut may be tenable for some hospitals, we note that the impact is more

significant for teaching and inner-city public hospitals where the hospital clinics are the main source of primary and specialty care in their communities,” Karen Smoler Heller, executive vice president of health economics and finance at the Greater New York Hospital Association, wrote in a Jan. 10 analysis of the change.

The extent of financial impacts of the change, according to supporters, would be limited by a recommended study of the cuts and a provision limiting reductions during the phase-in period to 2% of Medicare payments for disproportionate-share hospitals at or above the median.

But commission member Peter Butler, executive vice president and chief operating officer of Rush University Medical Center, Chicago, warned that such limitations to the cuts would apply to hospitals’ overall Medicare reimbursements, while the facilities’ outpatient care could undergo greater cuts.

The fight over the proposed cut is likely to continue once MEDPAC’S recommendation is delivered to Congress, where many leaders are searching for reductions in Medicare.

Separately, MEDPAC abstained from recommending any updates in physician pay rates because it formally recommended that Congress replace the physician sustainable growth-rate formula in October.

The panel also unanimously recommended a 0.5% update for ambulatory surgical centers; a 1% update for outpatient dialysis services; and a 0.5% update for hospice services. Meanwhile, the panel endorsed no increase in 2013 for inpatient rehabilitation facility services, long-term-care hospital services, or skilled nursing facility services.

MEDPAC unanimously recommended that the CMS launch a value-based purchasing program for ambulatory surgical centers by 2016.