MedPAC: Cut pay disparity between hospitals, offices

June 24, 2013

The need to equalize or narrow Medicare payment differences between ambulatory services provided in hospital outpatient departments (OPDs) and physicians’ offices is urgent, according to the Medicare Payment Advisory Commission (MedPAC).

The need to equalize or narrow Medicare payment differences between ambulatory services provided in hospital outpatient departments (OPDs) and physicians’ offices is urgent, according to the Medicare Payment Advisory Commission (MedPAC).

In its June 2013 report to Congress on Medicare and the health care delivery system, MedPAC cited significant payment differences across sites of care. Following up on its 2012 report, which recommended reducing Medicare payment rates for basic office visits from the rate in the outpatient setting to the office setting rate, the current report identifies additional services that may be eligible for cutting or eliminating payment differences.

“For example, Medicare pays 141% more for one type of echocardiogram when done in a hospital outpatient department than when it is done in a freestanding physician’s office,” according to MedPAC. “If Medicare pays a higher rate for a service in one setting over another, program spending increases and beneficiaries pay more in cost sharing without a corresponding increase in quality of care.”

According to the report, “Payment variations across settings urgently need to be addressed because many ambulatory services have been migrating from physicians’ offices to the usually higher paid OPD setting, as hospital employment of physicians has increased.

“In many cases, a physician’s practice that is purchased by a hospital stays in the same location and treats the same patients. Nevertheless, if the hospital converts a practice to an OPD and begins billing under the OPPS [outpatient prospective payment system], Medicare and beneficiaries pay more for the same services.”

MedPAC also identified 12 groups of services that are commonly performed in ambulatory surgical centers (ASCs) for which the OPD payment rates could be reduced to the ASC level. This policy would reduce Medicare program spending and beneficiary cost sharing by about $600 million per year, MedPAC said.

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