MedPAC analyzes readmissions reduction program, recommends increasing ambulatory E/M rates

The Medicare Payment Advisory Commission (MedPAC) released its semiannual report to Congress on June 15, addressing the impact of the Hospital Readmissions Reduction Program (HRRP), the implications of raising ambulatory E/M rates, and methods for ensuring appropriate access to hospital ED services.

MedPAC’s report summarizes the short-term financial impact of the HRRP—a pay-for-performance program intended to reduce readmission rates by lowering payments to IPPS hospitals for not meeting certain metrics.

After the program’s 2010 implementation, researchers expressed concern that reducing readmissions would lead patients to non-inpatient services, increasing observation stays or ED use. They also feared that the intentional reduction in avoidable readmissions would reduce necessary readmissions, resulting in higher mortality for heart failure patients.

To address these concerns, MedPAC examined readmission and mortality changes from 2010 to 2016. According to its report, the HRRP contributed to a significant decline in readmission rates without increasing ED visits or observation stays, or adversely impacting mortality rates.

The report also describes a budget-neutral approach for rebalancing the Medicare Physician Fee Schedule to increase payment rates for ambulatory E/M services by reducing payment rates for other services.

According to MedPAC, ambulatory E/M services, such as hospital outpatient visits, are underpriced relative to other procedures. MedPAC suggests increasing payment rates for ambulatory E/M services provided by all clinicians, regardless of specialty.

Under this budget-neutral approach, certain specialties such as endocrinology, rheumatology, and family practice will receive a large increase in total fee schedule payments. Other specialties, such as diagnostic radiology, pathology, physical therapy, and occupational therapy would see reductions in fee schedule payments of about 3.8%, because those specialists provide fewer ambulatory E/M services.

This adjustment to the fee schedule would “address several years of passive devaluation of ambulatory E/M services,” according to the report. 

The report also provides specific recommendations to Congress for using payment to ensure appropriate access to and use of hospital ED services. According to the report, Medicare should change the way it pays for ED services to reduce the risk of ED services being undersupplied in rural areas and oversupplied in urban areas.

MedPAC’s recommendations include:

• Allowing isolated rural stand-alone EDs (more than 35 miles from another ED) to bill standard OPPS facility fees
• Providing those EDs with annual payments to assist with fixed costs
• Reducing Type A ED payment rates by 30% for off-campus EDs located within six miles of an on-campus hospital ED