2% Hospital Reimbursement Hike, Other 2022 MedPAC Recommendations

In its annual March report to Congress, the Medicare Payment Advisory Commission (MedPAC) has recommended a 2 percent increase in Medicare hospital reimbursement rates in 2022 and no update for physician rates.

Hospitals modestly improved access to care and quality of care, while also maintaining access to capital and improving Medicare margins, according to data from 2019, the most recent year for which MedPAC had complete data.

In fact, the aggregate Medicare margin increased slightly from -9.3 percent to -8.7 percent among all hospitals paid under the Inpatient Prospective Payment System (IPPS), MedPAC reported. Additionally, the median margin increased from about -2 percent to -1 percent for relatively efficient hospitals, the group added.

Despite the COVID-19 pandemic in 2020, MedPAC expects IPPS hospital margins to continue to improve to about -6 percent in 2021, with efficient hospitals even achieving positive margins this year. This largely stems from the temporary suspension of the 2 percent Medicare sequester, which lawmakers are currently seeking to extend.

In light of the generally positive payment adequacy indicators, the group voted to recommend a positive Medicare hospital reimbursement update in 2022.

“Together with the statutory additional 0.5 percent increase to inpatient payments and the 0.8 percent increase to inpatient payments from our standing recommendation to replace the current quality program penalties with the HVIP, on net, inpatient payments would increase by 3.3 percent and outpatient payment rates would increase by 2.0 percent,” MedPAC explained in the report.

The HVIP is the Hospital Value Incentive Program, a model proposed by MedPAC to replace the current hospital quality payment programs and simplify the programs to pay hospitals based on quality performance.  

Notably, the recommended hospital outpatient reimbursement update is less than the 2.4 percent estimated under current law, but MedPAC intends for the new rate update to “limit growth in the differential between rates paid for physician office visits on a hospital campus and rates paid for those visits at freestanding physician offices.”

CMS has been addressing the rise in hospital outpatient department utilization through site-neutral payment policies despite pushback from leading hospital groups.

MedPAC also found that Medicare payment adequacy indicators for clinician services were also all positive in 2019. However, the group has recommended no update to the Medicare Physician Fee Schedule.

“The Commission’s analyses suggest that Medicare’s aggregate payments for clinicians are adequate. Therefore, the Commission’s recommendation is that the Congress should update the 2022 Medicare payment rates for physician and other health professional services by the amount determined under current law,” the report stated.

In total, Medicaid paid out $73.5 billion for clinician services—including office visits, surgical procedures, and diagnostic and therapeutic services—in 2019, accounting for just under 18 percent of traditional Medicare spending.

MedPAC also recommended no reimbursement increase in 2022 in four other Medicare fee-for-service payment systems: ambulatory surgical centers, outpatient dialysis facilities, skilled nursing facilities, and hospice services.

The group also voted to suggest to Congress that the aggregate hospice cap be wage adjusted and reduced by 20 percent, and that ambulatory surgical centers be required to report cost data to CMS.

For home health agencies and inpatient rehabilitation facilities, MedPAC recommended that Congress reduce Medicare reimbursement rates by 5 percent.

Long-term care hospitals were the only other provider type besides acute care hospitals to qualify for a reimbursement rate increase based on MedPAC’s payment adequacy indicators. The group agreed upon a 2 percent reimbursement rate increase in 2022.

In addition to annual Medicare reimbursement rate update recommendations, MedPAC also provided Congress recommendations on telehealth reimbursement after the COVID-19 pandemic.

The group voted to take a cautious approach to long-term telehealth reimbursement policy, recommending that Congress extend some temporary coverage and payment policies for telehealth services for one to two years after the pandemic ends.

During that time, Congress should gather more evidence on cost of services before making any policies permanent, the group stated.

MedPAC also recommended that policy prohibit providers from reducing or waiving cost-sharing for telehealth services after the pandemic, and that CMS should implement other safeguards to prevent unnecessary spending and potential fraud related to telehealth.

Additionally, the latest March report to Congress covered Medicare Advantage, Medicare Part D, and Medicare’s hospital post-acute care transfer policy.

Specifically, MedPAC found that Medicare reimbursement was significantly higher for Medicare Advantage enrollees than traditional Medicare beneficiaries, potentially indicating the need for an alternative benchmark policy to improve equity and efficiency in Medicare Advantage.

The group also found that expanding the hospital post-acute care transfer policy—which reduces hospital reimbursement for certain cases that are transferred to post-acute care providers—to hospice saved approximately $382 million over the first five quarters of implementation without significantly impacting timely access to hospice care.