New MedPAC Hospital, Physician Payment Updates a Mixed Bag for Providers

Janice Simmons, for HealthLeaders Media , January 15, 2010

The Medicare Payment Advisory Commission (MedPAC), at its monthly meeting in Washington on Thursday, voted to recommend that Congress give hospitals a fiscal 2011 payment update equal to the rate of change in the marketbasket index (currently projected at 2.4%) for inpatient and outpatient payments. This rate will be concurrent with implementation of a pay-for-performance program.

However, to restore budget neutrality at the federal level, MedPAC called on the Health and Human Services Secretary to reduce the inpatient update by up to 2% in 2011, 2012, and 2013 to recover earlier overpayments that resulted from recent documentation and coding changes in 2008. This could result in an inpatient update of just 0.4% in fiscal 2011.

"We're pleased that MedPAC recommended a full marketbasket update," said Don May, AHA vice president of policy, in a statement. "However, we are disappointed with the commission's coding offset recommendation, since CMS already has authority to apply an offset and has suggested using a less aggressive transition in its 2010 rule."

The Premier healthcare alliance supported MedPAC's recommendations for a full marketbasket update. "Such a recommendation signals to Congress that flat reductions in payment—rather than savings generated from delivery system reform—are imprudent given the poor state of the national economy," it said.

In a survey prepared by MedPAC staff, they noted that 218 top-performance hospitals from 2005-2007 they were evaluated had a 0.2% Medicare earnings margin. Other hospitals (1,991) showed an 8.3% decline.

Also on Thursday, MedPAC recommended that Congress provide physicians a 1% payment update in fiscal 2011. It also called for raising fee for service payments for practitioners who focus on primary care.

MedPAC additionally called for Congress to provide no payment update in fiscal 2011 for inpatient rehabilitation facilities, long term care hospitals, skilled nursing facilities or home health providers.

The MedPAC recommendations will be included in the report submitted to Congress in March.

Janice Simmons is a senior editor and Washington, DC, correspondent for HealthLeaders Media Online. She can be reached at

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