MedPAC Explores Site-Neutral Payment and Safety Net Policies

November 22, 2021

The Medicare Payment Advisory Commission (MedPAC) discussed site-neutral payments for ambulatory settings, policies to support safety net providers, telehealth, and accountable care organization (ACO) benchmarks at its November public meeting.

MedPAC noted that payment rates often differ for the same service among the three ambulatory care settings: hospital outpatient departments (HOPDs), ambulatory surgical centers (ASCs), and physician offices. MedPAC believes these payment differences incentivize higher-cost providers to acquire lower-cost providers, which can increase Medicare spending and beneficiary cost sharing. They also believe that the effect of the site-neutral policies in the Bipartisan Budget Act of 2015 has been limited, and are therefore evaluating expansion to other services and settings.

MedPAC staff identified services that could be appropriate for site-neutral payments, determined which ambulatory setting had the largest volume for the service, and aligned Medicare payments to that setting. This would reduce outpatient prospective payment system (OPPS) and ASC rates to a physician fee schedule (PFS) equivalent rate for 57 ambulatory payment classifications (APCs) and reduce OPPS rates to the ASC rate for 11 APCs. MedPAC estimated that this realignment would reduce beneficiary cost sharing by $1.93 billion and reduce Medicare program spending by $7.76 billion, mainly by cutting payments to hospitals. However, MedPAC expressed concern that cutting OPPS payment rates could reduce revenue for hospitals that serve vulnerable populations and suggested that savings could be used to support safety net providers and/or increase OPPS rates for services that would not be realigned (e.g., emergency department visits and complex surgical procedures). MedPAC will not make recommendations on site-neutral payments in its 2022 reports.

GNYHA opposes reducing OPPS rates to ASC or PFS levels and will continue advocating for appropriate reimbursement for hospital-based services.

The Commission also discussed policies to support safety net providers. Although disproportionate share hospital (DSH) payments support hospitals serving low-income patients, MedPAC found that DSH hospitals (particularly those with high shares of dual-eligible beneficiaries) have lower all-payer margins and are at a higher risk of closure. MedPAC also found that safety net hospitals have difficulty competing for labor and affording new technologies compared to hospitals with more commercially insured patients. The Commission discussed several potential policy changes, including narrowing the definition of safety net hospital to better target existing DSH subsidies, but is still evaluating alternative metrics that could be used to define safety net hospitals. MedPAC will continue these discussions at future meetings.

GNYHA will continue to advocate for adequate financial support for safety net hospitals.

MedPAC also provided an update on telehealth utilization and experience. During the COVID-19 public health emergency (PHE), Medicare temporarily expanded coverage of telehealth services under the PFS. MedPAC found that the volume of telehealth services increased, with mental health conditions accounting for a high share of services, and that beneficiaries and providers support ongoing Medicare telehealth coverage. The Consolidated Appropriations Act and the 2022 PFS final rule permanently expanded tele-behavioral health, removing geographic restrictions and covering audio-only behavioral health services. MedPAC discussed policy options to collect more data on telehealth use, such as requiring a claims modifier for audio-only telehealth services paid under the PFS and collecting claims data on telehealth services provided by home health agencies and hospice providers. The Commission will continue to evaluate telehealth policies.

The Commission also discussed how to set ACO benchmarks to avoid misaligned incentives. MedPAC staff argued that rebasing benchmarks can have a ratcheting effect in which ACO savings result in lower spending levels that become part of an ACO’s baseline spending benchmark when it is rebased. If ACOs consistently produce savings and benchmark levels decline, they must continuously find new efficiencies, putting long-term participation at risk and creating disincentives to achieve savings. The Commission discussed policy options to address this issue, including slowly blending in rebased benchmarks, rebasing using a three-year lag, and using an administratively set trend factor.