Medicare is recommending through one of its influential advisory boards that payment rates to providers be lowered.
The current issue is the different rates that are paid to doctors that work as part of a hospital owned clinic versus doctors that work on their own. Doctors that bill Medicare working as part of a hospital owned practice are reimbursed more than doctors that bill Medicare as part of their own independent practices. The reason behind this discrepancy is in the fee schedule that currently exist between Medicare’s Part A (inpatient) and Medicare’s Part B (outpatient).
In recent years hospitals have focused on purchasing independent physician practices. The main goal behind purchasing these independent practices has been to bring physician reimbursements under the Medicare Part A fee schedule. Under Medicare’s Part A fee schedule, physicians can bill at higher rates for the same services that they were providing when they were running their practices independently. It is not surprising that hospitals outpatient services provide higher profits.
Physicians have welcomed the idea of being bought out by hospitals as they see it as a way to offset declining incomes by billing using the Medicare Part A reimbursement schedule while obtaining long term employment agreements with the hospital. Being acquired is a good way to fight the rising costs of running an outpatient medical practice.
Medicare’s Payment Advisory Commission (MedPAC) wants reimbursements to be made site neutral immediately. The difference in charges between Medicare Part A (inpatients) and Mediare Part B (outpatients) patients should end. MedPAC states that Medicare pays under Part A scheme should match pays under the Part B scheme. The MedPAC report states “[i]f the same service can be safely provided in different settings, a prudent purchaser should not pay more for that service in one setting than in another”. According to MedPAC, “Medicare should base payment rates on the resources needed to treat patients in the most efficient setting, adjusting for differences in patient severity, to the extent that severity differences affect costs.”
The current disparities in payments have given an incentive to hospitals to buy independent physician practices increasing costs for Medicare and for beneficiaries. In order to accommodate Obamacare, physician reimbursements will need to go down.
As a way to meet the costly mandates under Obamacare and still maintain health plans cheap, insurers will need to control what providers do and limit what they are paid. In order to help the math work, Medicare billing rates are a target. Much of the private market is priced off the Medicare schedules.
Last year MedPAC proposed to cut Medicare’s fees to specialists and then freeze these lower rates for years. Under the proposal, specialists would see payments be decreased by 5.9% per year for three years totaling a 16.7% cut in reimbursements followed by a seven year freeze at the lower levels. Even these are just proposals, they need to be taken seriously.
You can read the Scott Gottlieb’s article here