MedPAC votes on pay cut for freestanding EDs, considers consolidating hospital reporting programs

At the April meeting of the Medicare Payment Advisory Commission (MedPAC), the panel voted to recommend a 30 percent cut to payment rates for standalone emergency departments (EDs) and indicated it may suggest action on hospital quality reporting later this year.

Members of the commission voted unanimously to recommend cutting reimbursement for freestanding EDs, which would be included in its June report to Congress. These facilities are a relatively new trend, with most of the 550 to 600 operating as of 2017 having been built since 2010. Since then, MedPAC found Medicare outpatient ED payments have increased by 72 percent per beneficiary.

Approximately two-thirds of those freestanding EDs are owned by hospital and can bill Medicare at equal rates to on-campus EDs. The problem, according to MedPAC, is paying freestanding rates at those rates is “misaligned with their relative costs,” as these facilities tend to be located in wealthier areas with lower patient severity and lower standby costs by not offering operating rooms, trauma teams or on-call specialists.

As with all MedPAC’s recommendations, it doesn’t carry any binding authority and suggestions can—and often have been—ignored by lawmakers and regulators. If the payment cut was adopted, it would apply to standalone EDs located within six miles of an ED on a hospital campus, which would cover about 75 percent of existing freestanding facilities in large markets.

The vote in favor of the payment cut came in spite of opposition from the American Hospital Association.

“Such a policy is unfounded and arbitrary—the commission has presented no analysis to support its concerns or specific recommended payment cuts,” wrote Ashley Thompson, AHA’s senior vice president of public policy analysis. The AHA did support another aspect of the MedPAC recommendation which would allow “isolated rural hospitals” to convert to freestanding EDs.

In a separate presentation, the commission discussed a recommendation for condensing four existing value-based payment programs from CMS into a single program.

The current programs are too numerous, complex and rely too heavily on condition-specific and process-focused measures, MedPAC analysts Ledia Tabor, MPH and Jeffrey Stensland, PhD, reported at the April meeting. They laid out a new kind of design called the Hospital Value Incentive Program (HVIP), which would focus on readmissions, mortality, spending and overall patient experience and account for socioeconomic risk factors.

In essence, the program would merge two programs (the Hospitals Readmissions Reduction Program and the Hospital Value-Based Purchasing Program) while eliminating the Inpatient Quality Reporting Program (IQRP) and the Hospital-Acquired Condition Reduction Program (HACRP).

HVIP would withhold two percent of hospitals’ inpatient Medicare payments and redistribute the money based on their scores—an incentive some commissioners questioned for being too weak. According to the presentation, most hospitals which are rewarded under the existing programs would continue to perform well under HVIP, with “about 75 percent of hospitals” being in the same or within quartile of performance.

No vote was taken on this proposal, with further discussion of consolidating quality reporting being pushed off until MedPAC’s next meeting in September.