The Medicare Payment Advisory Commission wants to keep exploring aligned payment for care provided at hospital outpatient departments, ambulatory surgical centers and physician offices in an effort to reduce incentives for healthcare consolidation and make sure beneficiaries aren’t paying more than needed, commissioners said Tuesday.
While hospitals can provide ambulatory care in those three settings, Medicare’s fee-for-service reimbursement system is different for each category. These differences in payment rates can lead to healthcare consolidation, because providers in higher-cost settings are incentivized to acquire providers in lower-cost settings and bill at higher payment rates, MedPAC staff said.
Hospital consolidation is already prevalent, and service delivery reflects this change. For example, 35.2% of chemotherapy administration occurred at hospital outpatient departments in 2012, compared to 50.9% in 2019, MedPAC staff said. This shift generally leads to higher beneficiary cost sharing.
But aligning outpatient payment is still difficult. Not all services provided at an outpatient department can be delivered in offices or ASCs, as they’re not covered under those payment systems. The OPPS and ASC payment systems also have different payment units than the fee schedule.
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To tackle these issues, MedPAC staff first put services into the payment classification system from OPPS, and aligned each classification with the setting that provided the largest share of that care. For 57 out of 162 classifications, payment could be aligned across all three ambulatory settings, leading to a 12% decrease in cost sharing and program outlay costs under OPPS and 6% under the ASC payment system. Rates from OPPS could be aligned with ASC rates for another 11 classifications, which also led to a small decrease in beneficiary cost sharing and program outlays. But MedPAC staff caution that rural areas may have fewer ASCs. If ASC rates are aligned with OPPS and hospitals respond to lower ASC rates by providing these services less, that could lead to access problems.
MedPAC staff say hospitals would see a decrease in overall Medicare revenue if officials made the outlined payment changes, but this decrease could disproportionately impact hospitals serving vulnerable populations. To remedy this, MedPAC staff came up with a stop-loss policy that would limit overall Medicare revenue loss for hospitals with an above-average disproportionate share hospital percentage.
Commissioners expressed strong interest in continuing to look into ambulatory site neutrality.
“I think this is urgent. It is not something that can wait 10 years — by then it’ll be kind of irrelevant in terms of the amount of consolidation that will have happened,” Commissioner Dr. Lawrence Casalino said.
Despite the enthusiasm, many wanted to tweak MedPAC staff’s method for determining which of the three settings should govern payment for a service. Some commissioners questioned the use of one year of data to make that determination, while others said the system needs to take patient characteristics into account, as other unified payment policies do. Several commissioners said setting the payment based on where the procedure is most often performed misses important information, and suggested adjusting for acuity.
“To me, the whole thing kind of hinges on this,” Casalino said. “The method we use to determine which of the three sites would set the payment rate is obviously critical, and I think probably deserves plenty more thought.”
Commissioners were also concerned with the potential impact of site-neutral payments on safety-net and rural hospitals, and several members suggested sharing savings from the policy with these facilities. Commissioner Lynn Barr, who currently leads Caravan Health and previously served as chief information officer for a rural hospital, also proposed MedPAC think about exempting rural hospitals from this system altogether.
Vice Chair Paul Ginsburg said savings shouldn’t be the main goal of site neutrality. Instead, MedPAC should focus on bringing payment closer to relative costs for delivery. This could include paying more for services unique to the hospital outpatient department, he said.
“Perhaps even this would make it more politically feasible to move forward and be somewhat less of a threat to the viability of hospitals,” Ginsburg added.
Hospital pushback to such a policy is likely. Hospitals have come out strongly against previous site-neutral payment models. When the Bipartisan Budget Act of 2015 aimed to align the outpatient prospective payment system with the physician fee schedule rates by establishing site-neutral payment for new off-campus hospital outpatient departments, the American Hospital Association sued the federal government over the policy. The Supreme Court declined to hear AHA’s appeal of the suit in June.
But this change hasn’t had much of an effect on actual payment because it applies to few OPPS payments, MedPAC staff said.
Congress also directed the Centers for Medicare and Medicaid Services in 2014 to create a unified payment system for post-acute care, a prototype for which is due next year. However, post-acute providers and hospital lobbyists are now pushing Congress to reset that timeline.
MedPAC plans to continue discussing this issue but won’t make recommendations on site-neutral payment for ambulatory services this cycle.
