MedPAC calls for pay parity between hospital, doctor office visits

The Medicare advisory panel says Congress should approve a law equalizing rates that would save about $1 billion a year.

By Charles Fiegl amednews staff — Posted March 26, 2012

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Payments for patient office visits provided in hospital outpatient departments would be reduced under a Medicare Payment Advisory Commission proposal sent to Congress in a March report.

The policy recommendation would lower hospital pay for primary care services to the rates paid for the same care when provided in physician offices. The commission detailed its proposal, which could save Medicare about $1 billion a year, in its annual report to Congress on March 15.

MedPAC has seen an increase in office visits provided to patients in hospital outpatient department settings as more hospitals acquire physician practices. In response to this shift, the commission wants Medicare to start paying consistent rates for office visits in both settings, said Mark E. Miller, PhD, the commission's executive director.

For instance, a mid-level office visit in a hospital outpatient department will pay $124.40, but the same visit in a physician's office will pay $68.97, or 44.6% less, MedPAC said. If Congress adopts the recommendation, both the hospital and the physician office would receive the $68.97 rate.

"In a perfect world, you would like to be paying the same for similar patients," Miller said.

The commission recommended that Congress enact legislation to phase in the payment parity provisions over three years. Reductions also should be limited for hospitals serving a disproportionate share of low-income patients, the panel said.

Medicare spending would be reduced by up to $5 billion over five years if the policy were adopted. However, Congress is not required to act on this recommendation or any of MedPAC's other advice.

The American Hospital Assn. strongly opposes plans to reduce fees for primary care provided in outpatient settings. In a December 2011 letter, AHA Executive Director Rick Pollack said outpatient departments tend to treat patients with more complex conditions. The costs to run outpatient departments also are higher than for physician offices because of the need for hospitals to have emergency standby capacity and to meet other federal regulatory requirements.

"Hospitals already are underpaid for these services, and recommending that payments for each of these services be reduced by 71% or more ... is excessive and harmful," Pollack said.

No doctor pay update recommendation

The MedPAC March report also forgoes its tradition of recommending a specific Medicare physician pay update for the upcoming year, instead reprinting its October 2011 letter to Congress urging lawmakers to repeal the Medicare sustainable growth rate formula that helps calculate physician pay.

Congress approved two-month and 10-month Medicare pay freezes to keep physician rates stable through the end of 2012. The Congressional Budget Office had projected that such a move would set up a roughly 32% cut for 2013 without another intervention by lawmakers. The Centers for Medicare & Medicaid Services estimated in a March 6 letter to MedPAC that the 2013 cut would be about 27% -- nearly the same amount as it would have been in 2012 -- but that figure could change before January 2013.

Temporary patches that override the SGR have undermined the credibility of Medicare, the commission said. In previous years, MedPAC has recommended modest annual rate increases when assessing Medicare physician payment adequacy, but Congress generally has approved smaller updates or rate freezes.

The American Medical Association has vigorously advocated for ending the SGR, but it strongly opposes MedPAC's proposal that Congress finance a repeal by freezing rates for primary care services for several years and reducing pay for specialty care by more than 15%.

MedPAC's plan would offset the roughly $300 billion cost of repealing the SGR, but if it were approved by Congress, the commission said it would continue to monitor payments to ensure the changes don't hurt patient access.

An SGR overhaul would reset the pay formula's baseline, Miller said. If further changes were needed, MedPAC could report policy recommendations that wouldn't cost nearly as much as the initial repeal of the SGR, he said.

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Medicare service volume slowed in 2010

The Medicare program has not been isolated from the health system-wide trend of lower per-capita spending on physician services. The Medicare Payment Advisory Commission reports that overall volume actually dropped from 2009 to 2010 after previous steady increases. Percentages reflect the change in volume growth per Medicare patient.

Type of service 2005-09 (average) 2009-10
Evaluation and management 1.2% -0.1%
Imaging 2.2% -1.5%
Major procedures 1.6% 1.1%
Other procedures 3.7% 0.2%
Tests 0.7% -0.6%
All services 2% -0.2%

Source: Report to the Congress: Medicare Payment Policy, March (link)

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