CHA News Article

MedPAC Releases Draft Recommendations for 2015 Payment Updates

The Medicare Payment Advisory Commission (MedPAC) has released draft recommendations on Medicare fee-for-service payment and policy changes for Congress to consider for calendar and federal fiscal year (FFY) 2015. MedPAC will meet in January to vote on its recommendations and will be watched closely by Congress as it looks for payment mechanisms for a long-term repeal of the Medicare sustainable growth rate for physician payments. For the second consecutive year, MedPAC has refused to consider the implications of sequester.

MedPAC’s specific draft recommendations include:

Hospital inpatient and outpatient payments: Despite MedPAC’s discussion of decreased cost and spending growth among hospitals, hospitals continue to have negative Medicare margins. In 2012, MedPAC calculated a negative 5.4 percent overall Medicare margin for hospitals. MedPAC projects that margin to decrease further, to negative 6 percent, in 2014 because of increased cost growth, increased case mix and the expiration of health information technology incentive payments.

Continuing its discussion from the October meeting, MedPAC recommended a 3.2 percent payment update for hospital inpatient and outpatient prospective payment systems in 2015, concurrent with implementing a number of additional recommended policy changes. The recommended policies include a reduction or elimination of differences in payment rates between hospital outpatient departments and physician offices for 66 selected APCs, and setting long-term care hospital (LTCH) payment rates equal to acute care hospital rates for cases not deemed critically chronically ill (CCI) by having an intensive care unit stay of at least eight days. MedPAC further recommended redistributing the savings from the site-neutral policy to the inpatient prospective payment system (IPPS) for use in outlier payments for CCI cases in IPPS hospitals.  MedPAC did not provide any financial impact analysis of the LTCH proposal, or any analysis of how it would impact access for Medicare beneficiaries.

Post-acute care reform: In addition to its typical payment update recommendations for each of the prospective payment systems (PPS), CMS called on Congress to direct the Secretary to implement a common patient assessment tool for home health, skilled nursing, inpatient rehabilitation and LTCHs by 2016. Notably, MedPAC pointed to the CARE tool as a viable option that could be phased in over time.  CHA has previously expressed its concerns to MedPAC regarding the viability of such a tool, which has been augmented for use in the bundling pilots being administered by the Centers for Medicare and Medicaid Innovation.

In addition, MedPAC put forward a draft recommendation that the hospice benefit be included in Medicare Advantage offerings.

Long-term care hospital payments:  In addition to the site-neutral proposal noted above, MedPAC recommended to eliminate the payment update for LTCHs.  LTCH Medicare margins are projected to be 6.5 percent in 2014.

Skilled-nursing facility payments: MedPAC recommended elimination of the payment update for skilled-nursing facilities (SNFs) and reiterated its long-term recommendations to first revise the PPS to pay more accurately for therapy and non-therapy ancillary services, as well as adding an outlier policy. 

Inpatient rehabilitation facility payments: MedPAC recommended eliminating the payment update for inpatient rehabilitation facilities (IRFs) in 2015, the same recommendation adopted for 2014. MedPAC estimates a 13.1 percent margin for freestanding IRFs, and some commissioners noted that, with increasing margins and despite a revision in the patient criteria,  a proposed cut to the update might be warranted. While no formal recommendation was offered, the chairman agreed to consider the commission discussion in bringing forward the final recommendations in January for a vote.

Home health:  The commission restated previous recommendations from 2011 and 2012 in reforming the payment system and recommended that Congress direct the Secretary to reduce payments for those with higher readmission rates than the benchmark rate that would be known in advance. The previous recommendations included reducing payments through a full “rebasing” of reimbursement. The commission further recommended eliminating the update for FFY 2015.

Hospice:  MedPAC projects margins for hospice agencies at 7.8 percent for 2014, and the draft recommendation under consideration is for Congress to eliminate the hospice payment updates for 2015.

The presentations made by MedPAC staff at the December meeting, along with the meeting transcript, are available on the MedPAC website at CHA will continue to monitor the developments of the commission and is currently preparing comments for consideration prior to a vote in January.  Members who wish to share comments should contact Alyssa Keefe at