MedPAC Adopts Recommendations for 2016 Payment Updates

From: CHA – 1/16/15

The Medicare Payment Advisory Commission (MedPAC) has approved final recommendations for 2015 Medicare payment updates, which will be released in March. The recommendations are nearly identical to the commission’s 2014 recommendations, with some additions, and will be closely watched by Congress as it looks for savings to fund a long-term repeal of the Medicare sustainable growth rate for physician payments. A complete list of specific MedPAC recommendations follows.

MedPAC’s recommendations include:

• Hospital inpatient and outpatient payments: MedPAC adopted its draft December recommendation and recommends a 3.25 percent increase for hospital inpatient and outpatient prospective payment systems (PPS) in 2016, noting that its recommendation is 5.25 percent if the sequester continues in 2016. MedPAC notes that even the most efficient hospitals it has identified will experience negative Medicare margins in 2016. However, MedPAC also stands by its recommendation to Congress to reduce or eliminate payment differences between hospital outpatient departments and physician offices for 66 selected procedures. The commission also recommends Congress pay long-term care hospitals (LTCHs) the same rates as general acute care hospitals for cases involving patients who are not deemed “chronically critically ill” (CCI) — defined as an intensive care unit stay of at least eight days. Savings realized by cutting LTCH payments would be redistributed to create a new outlier pool for CCI cases treated in inpatient PPS hospitals. The LTCH policy would be phased in over three years.

  Despite hospital opposition to the site-neutral recommendations noted above, MedPAC believes strongly in the principal that clinically similar patients can be seen in multiple provider settings and, as such, the payment rates should be equal. CHA has argued that both of these site-neutral recommendations are not only harmful to hospitals and patients, but that the analysis MedPAC engaged in setting forward these recommendations is outdated. Both the outpatient PPS and LTCH PPS have adopted significant policy changes that have not been accounted for by MedPAC. CHA is very disappointed in the site-neutral recommendations.

• Inpatient rehabilitation facilities and skilled-nursing facilities: MedPAC finalized its recommendation to eliminate the payment update for SNFs and IRFs in 2015. MedPAC continues to call for a recalibration of the SNF PPS to pay more for medically complex patients and to rebase the payment system over a period of time. In addition, MedPAC has voted to recommend that Congress direct the Secretary to eliminate the differences in payment between IRFs and SNFs for selected conditions. While its analysis focused on 22 MS DRGs for consideration, MedPAC stepped back from its more specific draft recommendation and noted that the conditions should be selected by the Secretary and considered through a notice of public comment. MedPAC also notes that this policy should be implemented over three years and that the IRF would retain its current add-on payments, but that the site-neutral payment should be set to the average SNF rate. Further, MedPAC recommends that regulations related to the 60 percent rule be reviewed and that such cases be removed from the threshold in order to remain compliant. The commission noted that while the payment would change in the IRF, this benefit would remain a Part A benefit and, therefore, subject to the same cost sharing as currently applied to the SNF stay.
• Ambulatory surgery center payments: MedPAC finalized its recommendation to eliminate the payment update for ASCs in 2016.
• Long-term care hospitals: MedPAC finalized its recommendation to eliminate the payment update for LTCHs in 2016.
• Home health: The commission restated previous recommendations from 2011 and 2012 in reforming the payment system and recommends that Congress direct the Secretary to reduce payments for those with higher readmission rates than the benchmark rate that would be known in advance. The previous recommendations included reducing payments through a full “rebasing” of reimbursement. This month the commission adopted its recommendation to eliminate the update for FFY 2015.
• Hospice: The commission adopted its recommendation to eliminate the update for FFY 2015.

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