MedPAC Recommends Physician Pay Increase for 2012

If Congress takes up recent recommendations made by the Medicare Payment Advisory Commission (MedPAC), acute care and outpatient hospitals, physicians and other health professionals, ambulatory surgical centers (ASCs), end-stage renal dialysis (ESRD) centers, and hospices should see payment rate increases in 2012. But for long-term care hospitals (LTCHs), skilled nursing facilities (SNFs), home health agencies (HHAs), and inpatient rehabilitation facilities (IRFs), MedPAC paints a different picture in its March 2011 Report to the Congress: Medicare Payment Policy.

Each year, the Commission considers the economic past, present, and future of health care spending and evaluates payment adequacy. It then reports to Congress, each March, payment recommendations for the Medicare fee-for-service (FFS) payment systems, the Medicare Advantage program, and the Medicare prescription drug program.

This year, MedPAC says the cost of health care spending continues to outpace the gross domestic product (GDP), albeit at a slower pace than previous decades. The spending increase can be mainly attributed to technology, and the growth rate decrease is due, in part, to the Patient Protection and Affordable Care Act, the Commission concludes.

Based on these findings and the current economic status of the nation, MedPAC makes recommendations in its report regarding Medicare FFS payment updates in 2012 for the following entities:

Hospital Inpatient and Outpatient Services

MedPAC recommends Congress increase payment rates for acute care hospital inpatient and outpatient prospective payment systems in 2012 by 1 percent. The Commission also recommends Congress require the secretary of Health and Human Services (the secretary) “to make adjustments to inpatient payment rates in future years to fully recover all overpayments due to documentation and coding improvements.”

Physician and Other Health Professional Services

The Commission also recommends Congress increase payments to physician and non-physician services in 2012 by 1 percent. In the report, commissioners acknowledge the ongoing issues of the sustainable growth rate (SGR) and its effect on FFS payment rates, but say:

“Notwithstanding these SGR issues, our analysis of Medicare’s payment adequacy for fee-schedule services provided by physicians and other health professionals finds that most indicators are positive and stable, suggesting that, at current payment levels, most beneficiaries can obtain care on a timely basis.”

Ambulatory Surgical Centers

Commissioners’ recommendation to Congress for ASCs is to implement a 0.5 percent increase in payment rates in 2012. This update, however, would be contingent to ASCs reporting cost and quality data.

“The Commission does not support a positive update for ASC services unless the Congress requires ASCs to submit cost and quality data to CMS.”

Outpatient Dialysis Services and Hospice

Payment indicators for both outpatient dialysis and hospice services are generally positive, but “the evidence on payment adequacy suggests that a moderate update of the composite rate is in order,” the Commission says. A 1 percent rate increase in 2012 is recommended.

SNFs, IRFs, and LTCHs

SNFs, IRFs, and LTCHs all saw positive margins in 2009, indicating these entities are currently self-sustaining and do not require additional capital. MedPAC recommends in their report to eliminate payment rate updates for these entities.

Home Health Services

MedPAC makes not one, but four recommendations to Congress regarding home health services. Indicators of payment adequacy for home health care are generally positive, the Commission says, but “significant vulnerabilities” need to be addressed. In addition to Congress eliminating the market basket update for 2012 and the secretary implementing a two-year rebasing of home health rates beginning in 2013, the Commission recommends:

  • Strengthening program integrity by increasing medical reviews in counties with unusually high home health use, and suspending payment and enrollment of new providers if there is a significant indication of fraud.
  • Improving payment accuracy by revising the home health case-mix system to rely on patient characteristics to set payment for therapy and non-therapy services, and no longer using the number of therapy visits as a payment factor.
  • Establishing beneficiary incentives by charging a per episode co-pay for home health services that are not preceded by hospitalization or post-acute care.

For complete details, read MedPAC’s March 2011 Report to the Congress: Medicare Payment Policy.


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