MedPAC Recommends 3.3% Hospital Payment Boost, No Change for Docs

January 21, 2020 - The Medicare Payment Advisory Commission (MedPAC) voted unanimously last week to recommend higher hospital payment rates to Congress later this year.

The group tasked with advising Congress on issuing affecting the administration of the Medicare program voted to recommend a 3.3 percent increase to hospital payment rates in 2021. The commission wants hospitals to have a 2.0 percent raise overall and tie the remaining 1.3 percent to quality metrics that would hold hospitals more accountable for the quality of care provided.

Current law calls for a 2.8 percent annual update to hospital payment rates in 2021. If Congress follows MedPAC’s recommendation, hospitals would receive 0.8 percent less in base rates, but the facilities would have an opportunity to earn some payments back through a quality incentive program.

MedPAC devised its recommendation to Congress to quell concerns that hospital payments are not high enough to maintain access to care. MedPAC staff reported that Medicare payments to hospitals still do not cover the costs of care. Medicare margins improved in 2018 but were still -9.3 percent. The median margin for efficient hospitals was -2 percent that year.

The commission also intends for its recommendation to maintain a level of financial pressure to limit hospital cost growth, reward high-performing hospitals, and shift Medicare payment rates toward the cost of efficiently providing high-quality care. It also stated that its draft recommendation would “minimize differential in payment rates across sites of care (e.g., on-campus versus off-campus provider payments).”

The recommendation is part of a larger effort to implement site-neutral payments across the healthcare industry. Most recently, CMS finalized site-neutral payments for certain clinic visits performed in hospital-based outpatient clinics despite a federal judge ruling that a similar policy implemented in 2019 overstepped the agency’s authority.

Under MedPAC’s recommendations, hospital payments would rise by $750 million to $2 billion in 2021 and $5 billion to $10 billion over five years.

Meanwhile, MedPAC did not recommend a payment update for physicians. The commission voted to recommend the maintenance of the 2020 payment rates for physicians in 2021. Although, staffers pointed out that clinicians in the Quality Payment Program’s Merit-Based Incentive Payment System (MIPS) would be eligible to receive a positive or negative 7.0 percent adjustment in 2021, and these clinicians would also have the opportunity to earn an “exceptional” performance bonus. Clinicians participating in the Quality Payment Program’s other track – Advanced Alternative Payment Model (APM) – would be eligible for a 5.0 percent incentive payment.

MedPAC estimated that 1 million clinicians will receive additional payments through MIPS or the Advanced APM bonuses next year.

The commission has expressed concerns about MIPS. In recent years, staffers have called for the replacement of the value-based reimbursement program, arguing that it “will not succeed in helping beneficiaries choose clinicians, helping clinicians change practice patterns to improve value, or helping the Medicare program reward clinicians based on value.”

Despite concerns with MIPS, MedPAC reported that beneficiary access to physician care remains high, with most beneficiaries reporting no problem obtaining a doctor’s appointment or finding a new physician. Beneficiaries also reported that access was similar to, if not better than, privately insured individuals who were between 60 and 64 years old in 2018.

However, quality of care is still mixed and both physician payments are cost continue to rise, MedPAC stated in the public meeting last week. Specifically, Medicare payments per beneficiary increased by 2.3 percent from 2017 to 2018 and private rates were 135 percent of Medicare rates in 2018. At the same time, input costs for clinicians increased by 1.7 percent from 2018 to 2019, 2.4 percent in 2020, and are projected to rise by 2.6 percent in 2021.

Congress does not have to implement MedPAC’s recommendations, but the commission plans to formally present their advice in a report later this year. The commission also plans to recommend:

• Increase Medicare base payment rates for long-term care hospitals by 2.0 percent
• Reduce Medicare based payment rates for inpatient rehabilitation facilities by 5.0 percent
• Eliminate the update to Medicare payment rates for skilled nursing facilities
• Reduce Medicare base payment rates for home health agencies by 7.0 percent
• Eliminate the update to Medicare base payment rates for hospice providers
• No change to current law for the Medicare end-stage renal disease prospective payment system base rate