MedPAC Recommends a 2% Increase to 2023 Hospital Payment Rates

January 18, 2022

At its January 2022 public meeting, the Medicare Payment Advisory Commission (MedPAC) voted to recommend 2023 payment update factors to Congress. To inform its recommendations, MedPAC staff evaluated payment adequacy indicators, including beneficiaries’ access to care, quality of care, access to capital and Medicare payments, and provider costs.

At the December 2021 public meeting, MedPAC staff presented its findings that hospital payment adequacy indicators generally remained positive in 2020 but that overall Medicare margins remained deeply negative (-8.5% in 2020, roughly the same as in 2019). MedPAC noted that overall hospital Medicare margins would have been -12.6% in 2020 without Federal COVID-19 relief via the Provider Relief Fund and the Paycheck Protection Program. These critical programs reduced hospital financial losses during the pandemic’s first year.

Based on this analysis, MedPAC recommended a 2% payment update for hospital inpatient and outpatient services, as specified under current law. Payments for inpatient services would also increase by 0.5% to account for the partial restoration of the documentation and coding adjustment. The Commission maintained its position that any needed financial support in response to the pandemic should be separate from the annual Medicare payment updates and distributed in a targeted manner.

MedPAC staff voted to recommend updates for other provider settings:

  • Physicians and other professional health services: Current law (no update)
  • Ambulatory surgical centers (ASCs): No update
  • Outpatient dialysis services: Current law (1.2%)
  • Hospice services: No update
  • Skilled nursing facilities: Reduce payments by 5%
  • Home health care services: Reduce payments by 5%
  • Inpatient rehabilitation facilities: Reduce payments by 5%
  • Long-term care hospital services: 2% (there is no current law update, but 2% reflects the projected market basket update minus the productivity adjustment)

MedPAC staff also voted to recommend that the Department of Health and Human Services Secretary should:

  • Require that clinicians use a claims modifier to identify audio-only telehealth services
  • Require that ASCs report cost data
  • Wage-adjust the hospice aggregate cap and reduce it by 20%
  • Require that hospices report telehealth services on Medicare claims
  • Require that home health agencies report telehealth services provided during a 30-day period

In addition to the payment adequacy assessment and update recommendations, MedPAC’s March 2022 report will include a review of Bipartisan Budget Act of 2018 changes to the hospital inpatient low-volume payment adjustment and an outline of a value incentive program for post-acute care. The Commission also discussed design features of a multi-track, population-based payment model, including potential incentives for participation, and administratively determined benchmarks. The June 2022 report will include final recommendations.