2015 MedPAC report to Congress: Recommendations for inpatient and outpatient hospital services and ambulatory surgical centers

On March 13, the Medicare Payment Advisory Commission (MedPAC) released the first of its two 2015 reports to Congress. MedPAC is comprised of 17 commissioners that meet throughout the year and then release a report to Congress in March and June of each year summarizing their conclusions and providing recommendations on various aspects of Medicare policy. The March 2015 report provides, among others, recommendations regarding Medicare payment rates and programs for different types of providers, a summary of the Medicare Advantage and Part D programs, and other major policy reform recommendations, such as a permanent repeal of the sustainable growth rate (SGR) formula.

In this update, we are providing a summary of the MedPAC 2016 payment rate and programmatic recommendations for inpatient and outpatient hospitals as well as for ambulatory surgical centers.

Inpatient and outpatient hospital services

MedPAC uses a number of indicators to determine whether payment rates for hospital inpatient and outpatient services are adequate. These indicators include: capacity and supply of providers, volume of services at facilities, quality of care, providers’ access to capital, and a comparison of Medicare payments to Medicare costs. Using these indicators, MedPAC made the following recommendations for 2016 Medicare rates for inpatient and outpatient hospitals services:

• Hospital outpatient department payment rates should be equal to those that are used at physician offices for certain ambulatory services classifications.
• Non-critically ill cases at long-term care hospitals should receive the same payment rates as those for non-critically ill cases at acute care hospitals. Long-term care hospitals are currently paid significantly higher rates than acute care hospitals. The savings from this would be redistributed to a new outlier pool of funds to help pay for serving critically ill cases at acute care hospitals. This would be phased in over a three-year period.
• For 2016, acute care hospital inpatient and outpatient rates should raise by 3.25 percent.

Ambulatory surgical centers

MedPAC uses nearly the same indicators to determine recommendations for ambulatory surgical centers (ASCs) as they do for hospital inpatient and outpatient services. In calculating the indicators, MedPAC found that the growth in the number of ASCs slowed from 4.2 percent in 2008 to just 1.1 percent in 2013. Second, MedPAC found that hospital outpatient department services are being used at a faster rate than those at ASCs. Finally, MedPAC found that ASCs provided care to 3.4 million Medicare beneficiaries and that the Medicare program spent $3.7 billion on these services. With these findings MedPAC made the following ASC related recommendations:

• The payment update for ASCs should be eliminated in 2016.
• ASCs should provide cost data to the Centers for Medicare and Medicaid Services (CMS) that would include: total facility costs, costs of staff that submit separate Medicare claims (such as anesthesiologists), total Medicare payments, and Medicare unallowable costs.
• CMS must create a value-based purchasing program for ASCs by the end of 2016.

It is unclear if Congress or CMS will act on these recommendations with either legislative or regulatory action. We will continue to monitor any policy or regulatory initiatives regarding payments to these types of facilities.

In our next MedPAC update, we will outline the MedPAC recommended 2016 payments rates and program updates for inpatient rehabilitation facilities, skilled nursing facilities, and long-term care hospitals.

For more information on this topic, or to learn how Baker Tilly healthcare specialists can help, contact our team.