MedPAC likely to support pay increase for hospitals in 2023

Hospitals, dialysis facilities and long-term care hospitals could see Medicare reimbursement bumps in fiscal 2023 under draft recommendations from the Medicare Payment Advisory Commission. Skilled nursing, home health and inpatient rehabilitation facilities could see 5% base pay decreases. Physicians, ambulatory surgical centers and hospices may see no change in pay from 2022.

Post-acute care providers and stakeholders that could be facing pay freezes said they’re disappointed in MedPAC’s draft proposals. MedPAC’s own commissioners agreed with most recommendations staff presented. However, several members had concerns about leaving physician pay flat in 2023. Recommendations will come to an official vote at next month’s meeting.

MedPAC staff suggested updating hospital payment by the amount determined under current law, which is expected to be 2% for 2023.

MedPAC assesses payment adequacy by examining factors like access to care, access to capital and Medicare payments. To guide their 2023 draft recommendations, staff used 2020 data, which is colored by the COVID-19 public health emergency. But MedPAC believes most of the PHE’s effects on the health system will be temporary, and thus shouldn’t be tackled through fee schedule updates.

While commissioners largely supported the draft recommendation, Commissioner Brian DeBusk, CEO of a medical equipment manufacturer DeRoyal Industries, encouraged MedPAC to watch the healthcare labor market closely. Hospitals will likely continue to pay more for nursing staff going forward, and that could impact the hospital wage index. Medical device markets also should be taken into consideration, he added.

“Let’s make sure that these effects are captured into 2023 rates. Because I do think that failing to get those incorporated into 2022 already will be disastrous for hospitals next year,” DeBusk said.

In contrast, Commissioner Bruce Pyenson, an actuary, noted that many Medicare beneficiaries have passed away prematurely during the COVID-19 pandemic, which may lead to a decrease in Medicare hospital services demand over the next couple years. Commissioners should think about this when planning payment increases for hospitals, he said.

For physicians, MedPAC’s draft proposal involves no payment update in 2023, aside from performance-based adjustments or extra pay providers can receive from being in an alternative payment model. Commissioners were divided on whether they’d be willing to support this recommendation.

The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) dictated a 0% raise for physician pay through the fee schedule, opting instead to offer raises through quality payment programs. That works in a low-inflation environment, but it could lead to seriously underpaying providers in 2023, said Commissioner Lynn Barr, who leads Caravan Health, which guides providers through value-based care.

Several commissioners said they planned to vote in favor of the recommendations next month but want to dig deeper on beneficiary access to primary care and its relationship to race and sociodemographic status.

The American Medical Association disagrees with MedPAC and feels physicians need wholesale payment reform.

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“The AMA seconds concerns raised by several commissioners that a zero percent update is unsustainable and risks exacerbating health inequities—and urges MedPAC to highlight those concerns in its report to Congress,” AMA President Dr. Gerald Harmon said in an emailed statement.

MedPAC’s draft recommendation for ambulatory surgical centers would eliminate the pay bump they’re receiving in 2022.

While commissioners supported the update overall, DeBusk indicated he’d like to see a pay increase for ASCs to help encourage growth in the sector. But MedPAC Chair Michael Chernew pushed back, saying increasing ASC base payment won’t necessarily lead to more ASCs and program savings. Instead, MedPAC could explore alternative payment models outside of fee schedule updates, he said.

MedPAC also drafted a recommendation that HHS require ASCs to report cost data, which has been proposed each year for more than a decade but never implemented. Commissioners again supported the idea.

“If ASCs won’t show us their cost reports it’s really hard for us to show them a positive update,” said Commissioner David Grabowski, of Harvard Medical School.

Post-acute care settings, on the other hand, could see rate cuts under MedPAC’s draft recommendations.

Nursing homes may face a 5% decrease in Medicare base pay. MedPAC suggested no change to nursing home payment for 2022, but Medicare margins have remained above 10% for 20 years now. These high margins indicate a cut is warranted, staff said.

The American Health Care Association/National Center for Assisted Living said in an email that MedPAC’s recommendation for nursing homes could be devastating to facilities, and resources shouldn’t be taken away from those fighting on the frontlines.

Inpatient rehabilitation facilities could also get a 5% pay decrease if MedPAC’s draft recommendation is picked up. Providers supported this but said the commission should talk more in the future about the differences between hospital-based and free-standing IRFs.

The American Medical Rehabilitation Providers Association is disappointed in the proposal as well, especially given staffing challenges and increased resource costs IRFs face right now.

MedPAC additionally suggested hospice rates remain unchanged in 2023, leaving them at their 2022 levels. MedPAC’s draft recommendations for outpatient dialysis clinics and long-term care hospitals would update the sectors’ payment consistent with current law, amounting to an increase for both.

MedPAC also considered recommending HHS add a claims modifier for physicians to indicate if a service was delivered via audio-only telehealth, and a requirement that hospices and home health agencies report telehealth visits. Commissioners widely support these ideas.

The commission doesn’t believe any of the suggested changes will impact access to care.

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