MedPAC report aims to even playing field between hospitals and independents

Medicare commission’s report to Congress wants to even the payment disparity for some procedures performed in hospital outpatient departments (OPD) and office-based practices.

In fact, the Medicare Payment Advisory Commission (MedPAC) says, “Payment variations across settings urgently need to be addressed because many services have been migrating from physicians’ offices to the usually higher paid OPD setting, as hospital employment of physicians has grown.”

The focus is not on increasing pay to office-based physicians, however, but decreasing costs to OPDs.

While MedPAC recognizes there are cost variables between hospitals and office-based practices, it has identified 66 groups of services provided in OPDs and freestanding offices “that meet the commission’s principles for aligning payment rates across settings.”

Medicare’s payment rates often vary for the same ambulatory services provided to similar patients in different settings, such as physicians’ offices or OPDs, the report says. “For example, in 2013, Medicare pays 141% more for a level II echocardiogram in an OPD than in a freestanding physician’s office. These variations raise questions about how Medicare should pay for the same service when it is delivered in different settings.”

The report also introduces a payment model called competitively determined plan contributions, delves into detail regarding improving care for dual-eligible beneficiaries-including care coordination- and outlines a plan to reduce hospital readmissions through hospital penalties and bundling post-acute care services.

According to the Association for Independent Doctors, this disparity in reimbursement levels has contributed to the decline in the numbers of physicians in independent private practice.

In fact, the association reports that the number of independent doctors (i.e. those not employed by hospitals) as a percentage of total doctors has declined from 57% in 2000 to a projected 36% in 2013, while the number of hospital-employed physicians has skyrocketed.

“By pursuing the guidance set forth in the MedPAC Report, and lowering high reimbursements to hospitals, Congress can promote at least three important objectives:

1.   reduce U.S. government spending;

2.  lower cost of health care for patients when they seek health care services at hospitals

3.  help level the playing field between hospitals and independent doctor practices, by alleviating marketplace distortions that contribute to hospital consolidation and excess market power.”