MedPAC to Recommend Safety Net and Site-Neutral Payment Policies

November 7, 2022

At its November public meeting, the Medicare Payment Advisory Commission (MedPAC) discussed Medicare payments for safety net hospitals, aligning payment rates across ambulatory settings, a post-acute care (PAC) prospective payment system (PPS), quality measures across Medicare populations, and increasing payments to primary care clinicians.

The Commission continued to discuss a revised method for targeted funding for safety net hospitals. MedPAC presented its revised measure of safety net status, the safety net index (SNI), which it calculates based on the share of: 1) Medicare beneficiaries treated by the hospital who are low income, 2) uncompensated care (UC) costs as a share of revenue, and 3) half of the share of inpatient days attributable to Medicare patients. MedPAC defines low-income Medicare beneficiaries as those who are dually eligible for both Medicare and Medicaid and/or receive the Part D low-income subsidy (LIS) and refers to this population as “LIS beneficiaries.” Safety net funds would be distributed to hospitals with SNIs at or above the fifth percentile, with a higher SNI resulting in higher payments. MedPAC staff noted that their proposed safety net definition would redistribute funds to hospitals that serve high shares of LIS beneficiaries compared to the current disproportionate share hospital and UC distribution that weights funding toward hospitals with high UC costs but relatively few Medicare patients. The Commission noted that it will likely draft a recommendation on this issue for its December payment update meeting. While MedPAC has not yet publicly issued its model specifications, GNYHA is modeling the potential impact of such changes to the safety net definition and funding distribution on its members.

The Commission also continued its work from last year’s cycle to align payment rates across hospital outpatient departments, ambulatory surgical centers, and physician office settings. After identifying services that could be appropriate for site-neutral payments, MedPAC determined which ambulatory setting had the largest volume for the service and aligned Medicare payments with that setting. Under current law, these potential changes would be implemented in a budget-neutral manner. However, the Commission discussed potential alternatives to budget neutrality, including savings for the Medicare program such as by redirecting part of the savings to fund safety net hospitals by limiting reductions in Medicare revenues. The Commission plans to review its draft recommendations in the spring.

MedPAC staff presented their evaluation of the Secretary of the Department of Health and Human Services’ (HHS) prototype design for a unified PAC PPS. In response to a Congressional mandate, the Commission recommended its own PAC PPS design in June 2016 that bases payments on patient characteristics rather than PAC setting. Earlier this year, the HHS Secretary released a prototype that revises payments by case-mix, PAC setting, comorbidities, and an adjustment for rural facilities. MedPAC staff determined that the HHS Secretary’s design is a good starting point but noted that refinements are needed. The Commission will discuss refinements at the March 2023 meeting and will vote on draft recommendations in April.

MedPAC staff presented their analysis of disparities across five MedPAC-developed claims-based quality metrics (i.e., stratified by race/ethnicity and low-income status): ambulatory care sensitive hospital use, ambulatory care sensitive emergency department visits, risk-adjusted all-condition hospital readmissions, risk-adjusted successful discharge to the community for skilled nursing facility patients, and risk-adjusted successful discharge to the community for home health care. MedPAC stated that public reporting of quality measures stratified by social risk and the incorporation of health equity measures into payment programs are two examples of policies that could help reduce noted disparities. The Commission will include its work on this topic in its June 2023 report to Congress.

The Commission also discussed policy options for increasing payments to primary care clinicians, including creating separate fee schedules for evaluation and management (E/M) services and non-E/M services, and establishing a new per-beneficiary payment for primary care clinicians.