MedPAC to Include Site-Neutral Payments, APMs in June Report to Congress

April 11, 2022

The Medicare Payment Advisory Commission’s (MedPAC) April 7-8 public meeting highlighted topics that will be included in its June 2022 report to Congress, including site-neutral payments and alternative payment models (APMs). The Commission also discussed Part B drug pricing and its initial efforts to address social determinants of health (SDH) for Medicare beneficiaries.

MedPAC continued the work discussed in November 2021 to align payment rates across hospital outpatient departments, ambulatory surgical centers (ASCs), and physician office settings. MedPAC first identified services that could be appropriate for site-neutral payments, then determined which ambulatory setting had the largest volume for the service, and aligned Medicare payments with that setting. The proposed realignment would reduce Medicare program spending and beneficiary cost sharing by an estimated $8.83 billion and $2.26 billion, respectively, mainly by cutting payments to hospitals. While under current law these changes would be implemented in a budget-neutral manner, the Commission also discussed options to use the lower spending as savings for the Medicare program or redistributions to safety net providers. MedPAC will include its analysis in its June report, and the Commission will continue its work on this topic during next year’s cycle. GNYHA strongly opposes site-neutral policies that reduce the rates for hospital outpatient services.

The Commission also discussed recent efforts to streamline Medicare APMs by harmonizing accountable care organizations (ACOs) and episode-based payment models (EPMs). The Commission supported reducing the number of ACO tracks and eliminating the rebasing of benchmarks, basing them on historical spending instead. The Commission also supported operating a national EPM concurrently with ACOs for certain types of episodes. The June report will detail this topic.

MedPAC highlighted its recent efforts around Part B drug pricing, presenting the following policy options to lower prices while maintaining clinical benefits and incentives for innovation:

  • Address the high launch prices of first-in-class drugs with limited clinical evidence by conditioning Medicare coverage on evidence of the drug’s risks, benefits, and impact on quality of life or functional status, and capping payment rates based on cost effectiveness
  • Apply reference pricing to Part B drugs with therapeutic alternatives by setting a payment rate for a group of drugs with similar health effects based on either the lowest average sales price (ASP), a volume-weighted ASP of all drugs in the reference group, or the lower of the volume-weighted ASP for the group or for the specific drug
  • Modify the Part B drug payment add-on of 6% of ASP to remove incentives for providers to choose higher-priced drugs, instead using the lesser of 6% or $175, 3% plus $21, or the lesser of the three amounts

MedPAC will continue to discuss Part B drug pricing when it reconvenes in the fall.

The Commission also discussed preliminary policy options to address SDH for Medicare beneficiaries, with MedPAC staff summarizing a commissioned literature review on providers’ current efforts in this area. Based on the review’s findings, MedPAC staff suggested that future efforts to address SDH focus on redesigning quality-based incentive programs and examining the impact on safety net providers, incorporating social risk factors into payment adequacy analyses, and collecting better SDH data.