AHA and MedPac have major differences over “site-neutral” Medicare policy

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There’s a post-election battle brewing between the American Hospital Association (AHA) and the  Medicare Payment Advisory Commission (MedPac) over a proposed “site-neutral” Medicare policy for reimbursements.

At an Oct. 4, 2012, presentation titled “Addressing Medicare payment differences across settings: Ambulatory care services,” MedPac challenged the traditional manner in which patients are charged more for the same service if they use the hospital outpatient department (HOPD) as opposed to a physician’s office. MedPac charges that this inconsistency “raises program spending and beneficiary cost sharing” and has proposed that “Medicare should base payment rates on resources needed to treat patients in [the] lowest-cost, clinically appropriate setting.”

Because more physicians are being employed by hospitals, thus concentrating these services in HOPD, MedPac would like to “equalize rates for non-emergency E&M visits across settings” believing that “the magnitude of the difference [between rates in the HOPD and physician’s offices] could be narrowed.” This would bring program spending down by $900 million, MedPac believes, and beneficiary cost sharing by $250 million.

The American Hospital Association is not pleased with this proposal at all. AHA fired back a letter at MedPac in which it declared in no uncertain terms, “The AHA strongly opposes the notion that the total amount of payment when a physician performs a service in an HOPD should be the same as when a physician performs the service in his or her office. “

Should this proposal pass, AHA foresees cuts of more than $2 billion over the course of one year for HOPD service, especially in light of MedPac’s previously proposed payment cuts for 10 Evaluation and Management services. As a result, hospitals will have to issue “deep cuts” to their “routine outpatient services.”

There are three ways in which the AHA distinguishes the role hospitals play in a community from the role physicians play. First, the hospital provides 24/7 access to care. Second, there’s the safety-net role, defined as “caring for all patients who seek emergency care regardless of ability to pay.” Finally, there’s disaster readiness and response when it comes to “victims of large-scale accidents, natural disasters, epidemics, and terrorist actions.”

“These critical roles,” the AHA writes, “while often taken for granted, represent an essential component of our nation’s health and public safety infrastructure.”

AHA also emphasized the uncompensated care hospitals provide in this “standby role,” $39 billion each year, while physicians have the choice of not seeing patients who can’t pay (i.e. Medicare and charity patients).

“Hospitals today face challenges in maintaining this role, such as increasing demand, staffing, and space constraints, greater expectations for preparedness, the erosion of financial support from government payers, and the loss of patients to other settings that do not have the added costs of fulfilling the standby role. It is critical that MedPAC consider this unique role of hospitals before making additional recommendations to cut payment for HOPD services.”

It will be interesting to see how this exchange of words plays out. One thing is for sure, however.

The last words hospitals and physicians want to hear these days are “deep cuts.”

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