“Fiscal Cliff” Issues Impacts Hospitals, Physicians

Should Congress agree to a short term “fiscal cliff” deal by year’s end, it will likely include a one-year extension of the current SGR formula (physician Medicare payment fix). The cost of a one-year doc deal is $27 billion.  Congress may pay for the extension by reducing Evaluation and Management (E&M) payments to hospitals and eliminating the payment increase to primary care physicians in rural areas that is planned to start in January.

There are other policy changes under review, including additional “site neutral” payment reductions. Congress is considering enacting two policies that MedPAC is advancing in response to the growing acquisition of physician practices by hospitals and the higher rates paid for services provided under the outpatient PPS. The first policy change would reduce the Outpatient Prospective Payment System (OPPS) payment rate for E&M procedures to the physician fee schedule practice expense amount (if the procedure was done in a physician office).

Congress is also considering a second MedPAC policy even though the Commission has not adopted formal recommendations. In this change, MedPAC proposes capping OPPS payment at the physician practice expense amount for diagnostic and surgical services that are performed more than 50% of the time in the physician’s office. This policy is extremely complicated, and Congress seems to be moving toward legislation that would cap payment at the ambulatory surgical center rate. This would amount to about a 40% drop in payment for services like pain management injections, colonoscopies, and laser eye procedures. Taken together, this would cut about 5% out of total OPPS Medicare spending (equally divided between the E&M codes and the procedures).

Our policy staff done some modeling of the MedPAC and alternative proposals to identify which services are likely to be affected. Click here for the spreadsheet that explains the methodology and provides enough detail to model the impact on operations based on several alternatives under consideration.

CBO Publishes List of other Potential Health Care Cuts

What else might Congress cut? In the short term, not much else is on the table. However, a longer-term reduction between $400 billion and $700 billion over 10 years, is under consideration for next year. The Congressional Budget Office released a report highlighting several healthcare related cuts/changes that if implemented, could help lower spending by $445 billion by 2020. Below is the full list of healthcare cuts and revenue raisers suggested in the report. Click here for the full CBO report.

• Repeal of ACA’s expansion of health insurance coverage
• Convert federal share of Medicaid long-term care payments into block grants.
• Repeal health insurance mandate.
• Increase Part B premium to 35% of program costs.
• Raise Medicare eligibility age to 67.
• Reduce floor on federal matching rates for Medicaid.
• Add “public plan” option to Exchanges.
• Require drug manufacturers to pay minimum rebate under Part D for low-income beneficiaries.
• Change cost-sharing structures for Medicare & medigap insurance.
• Limits on malpractice torts.
• Consolidate and reduce GME payments.
• Eliminate CAH, SCH, and MDH programs.
• Reduce, across the board, Medicare payments in high-spending areas.
• Slow growth rate of federal contribution to FEHBP and voucherize the program.
• Introduce minimum out-of-pocket requirements for TRICARE for Life.
• Reduce income eligibility limits and maximum benefits for SNAP program.

AHA Opposes Health Care Cuts in Letter to Congress

The American Hospital Association sent a letter to Congress last week urging them not to cut health care providers. Click here for the letter. The association also urged Congress extend several expired or expiring Medicare provisions including:

• Medicare-dependent hospital program.
• Payment adjustment for low-volume hospitals.
• Hospital outpatient hold-harmless payments.
• Section 508 area wage index reclassifications.
• An increase in payments for ambulance services.

Docs Campaign Against Cut to Payment Program in Rural Areas

Dozens of physician groups wrote to Congress urging lawmakers not to cut the payment increase to primary care physicians in rural areas. Click here to review the letter.

Sens. Schumer, Grassley Lead Letter Against Rural Payment Cuts

Thirty-one senators are pushing to reinstate expired programs that increased Medicare payment for some rural hospitals as part of legislation that would block scheduled year-end cuts to Medicare physicians. The bipartisan group asked leaders of the Senate Finance Committee to continue the programs, which expired Sept. 30, through the end of fiscal 2013. Click here to review the letter.

Hospital Medicare Payment Increase in 2014 Could Be 1%

It now appears MedPAC will recommend a 1% Medicare payment increase for hospitals in 2014; an issue discussed by commissioners at its two-day meeting last week. Between 2010 and 2011, hospital inpatient Medicare spending dropped an average of 1% , while Medicare outpatient spending increased 9%.  The overall increase was 2% for hospitals.  Medicare spending for Critical Access Hospitals increased an average of 6%. Click here for an excellent review of these issues in 19 slides from MedPAC.

MedPAC: Are LTCHs Necessary?

MedPAC commissioners raised serious concerns at their December 7 meeting in Washington over long term care hospitals (LTCHs) and some wondered aloud whether they should exist at all. MedPAC staff summarized the issues in a PowerPoint presentation (click here) and suggested that LTCHs might not receive a Medicare payment update next year. That may also be the recommendation for inpatient rehab facilities and hospice.

MedPAC: No Medicare Payment Increase for Hospice

The Medicare payment margin for hospice in 2010 was 7.5%, according to MedPAC data disclosed last week. However, this “healthy” margin may be the primary reason why hospice may not receive a Medicare payment increase next year. Click here to review the summary of hospice data from Friday’s MedPAC presentation.

IRF Medicare Margin: 9.6%

Medicare margins for inpatient rehab programs was 9.6% in 2011, according to MedPAC. Most (80%) of IRF are locations in short term acute hospitals, but the most profitable are freestanding, according to the data.  Again, the financial health of IRFs will likely result in a “zero” Medicare payment increase next year. Click here to review the MedPAC data on IRFs.

Taxes on Wealthy to Increase in January to Pay For ACA

Taxes are going up in January – without any additional action by Congress – on the nation’s wealthiest Americans to help pay for the Affordable Care Act. Among the most affluent fifth of households, those affected will see tax increases averaging $6,000 next year, economists estimate. Click here for the story in the New York Times.

Fewer In Internal Medicine Want to Become Primary Care Docs: Study

Less than a quarter of new doctors finishing an internal medicine training program planned to become a primary care physician instead of a specialist, in a new study released last week. That suggests fewer generalists will be entering the workforce, researchers said, possibly exacerbating the primary care doctor shortage in parts of the United States. Click here for the story. Click here for the JAMA abstract.

IRS Issues Rule Outlining New Tax on Medical Devices

On December 5, the IRS issued a final rule providing guidance to manufacturers, importers, and producers of taxable medical devices on the excise tax imposed on the sale of certain medical devices. The 2.3%  medical device excise tax will go into effect January 1, 2013, and applies to devices that meet certain requirements established by the FDA to be considered a taxable medical device. The new tax does not apply to sale of eyeglasses, contact lenses, or hearing aids, and the final rule also establishes a “retail exemption” for the sale of any other devices that are typically purchased by the general public for individual use. The rule outlines a specific approach for determining whether and how a device qualifies for the retail exemption. Click here to review the rule.

Dual-Eligibles Focus of Expansion, Need for Protections

California’s experiment with redesigning its “dual-eligible” program for some of the nation’s poorest and sickest patients is showing promise, according to published reports. That’s good news for the federal government as it plans to roll out a massive expansion of the a similar program across the country. Click here for an excellent summary. Consumer protections for dual eligibles appears to vary widely state-by-state, according to a new GAO report. Click here for that report.

Men More Likely Than Women to be Cancer Victims: Study

Not only are men more likely than women to be diagnosed with cancer, among those who get the disease, men also have a higher chance of dying from it, according to a new study. That translates to an extra 24,130 men dying of cancer in 2012 because of their gender. Click here for the news report. Click here for the abstract from the Journal of Urology.

ED Crowding, Diversions Increase Odds of Dying in Hospital

Admission to the hospital from the ED on days with prolonged ambulance diversion or high ED crowding was associated with 5% increased odds of dying in the hospital compared to admissions on days with low ambulance diversion, according to a new study published last week in the Annals of Emergency Medicine. Click here to see the full 13-page report.

Lobbying Escalates for Health Group Inclusion in EHB Packages

As essential health benefit packages take shape in each state, various health care groups are stepping up their lobbying activities in an effort to be included in the final package. Click here for a NY Times report.