MedPAC Recommends Payment Equalization

At its January 16th meeting, the Medicare Payment Advisory Commission (MedPAC) voted unanimously to recommend that Congress reduce hospital outpatient rates for 2015 to bring them in line with physician office rates for 66 Ambulatory Payment Classifications (APCs).

MedPAC’s primary rationale for these recommendations was that the current system “encourage[s] care to be shifted to higher-cost sites” which, in turn, “can increase provider costs of care, increase Medicare program costs, and increase beneficiary cost sharing without any evidence that care is improved.”   The commissioners cited evidence that the desired effect had occurred in prior years when similar payment equalizations were made, including that “the volume of E&M office visits, echocardiograms, and nuclear cardiology services that are provided in freestanding offices all decreased in 2011 and 2012 while the volume increased in OPDs for the same services.”  With these recommendations, therefore, MedPAC is seeking to “align payment rates for similar cases across silos in order to eliminate this distortion in Medicare prices which can create inefficiency.”

MedPAC recommended reduction in hospital outpatient rates for 66 specific ambulatory payment classification codes (APCs). In formulating its recommendation, the committee concluded that the higher payment rates for hospital outpatients, as compared to payment rates for freestanding physician offices, are sometimes, but not always, justified. MedPAC concluded that such differences are not justified for APCs that (1) are provided in a physician’s office more than 50% of the time, (2) have minimal differences in packaging of supplies and ancillaries services in the payment rates, (3) are infrequently provided in emergency departments, (4) occur when patient severity is no greater in hospital outpatient rates than in physician offices, and (5) are not a 90-day global code in the physician fee schedule.

Break Away from the Static

MedPAC identified 24 APCs that satisfied all five of those criteria and recommended reducing hospital outpatient  rates to levels equal to those paid in freestanding physician offices. MedPAC also identified 42 APCs that involve a higher degree of packaging of ancillary services and supplies in hospital outpatient rates but met the remaining four criteria. For those APCs, MedPAC recommended reducing hospital outpatient rates, but to levels that remain somewhat higher than those paid in freestanding physician offices in order to account for the differences in packaging. A list of the APCs identified by MedPAC can be found here.

MedPAC is an independent Congressional agency established to advise the Congress on issues affecting the Medicare program. MedPAC’s recommendations are expected to appear in its March 2014 report to Congress.

ADVOCATE will continue to keep you informed on this and all issues impacting your radiology practice.

With best regards,
Kirk Reinitz, CPA