By Kerry Young, CQ Roll Call
October 27, 2015 -- The pending budget deal would clamp down on a strategy that hospitals have used in recent years to expand their Medicare payments—physicians' practices newly acquired by hospitals would not quality for higher reimbursements than independent physicians.
Many lawmakers and Congress' advisers on the Medicare program have been concerned about the trend of hospitals acquiring doctors' practices with an aim of securing higher federal payments. The purchased practices can bill Medicare for routine services through the program's hospital outpatient system, which generally receives more generous rates than independent practices. A routine 15-minute office visit for an elderly person, for example, cost about $72.50 at an independent doctors' office in 2013, but $123.38 if billed through the hospital outpatient system, according to the Medicare Payment Advisory Commission.
Under the budget deal, newly acquired practices that are not integrated into hospitals' main campuses would be limited to billing under less lucrative Medicare payment systems—the physician fee schedule and the one used for services in certain specialty surgical clinics. This restriction would apply to satellite offices located more than 250 yards from main hospital campuses.
It would take effect in 2017 and would save an estimated $9.3 billion over a decade.
The American Hospital Association had no immediate comment on the provision. Quick to praise the proposed change in Medicare billing were AARP and an alliance of medical organizations and trade groups for insurers.
The proposed change is a "positive step forward in addressing unfair payment disparities for identical clinical services provided in different healthcare settings, which are shown to increase costs and encourage market consolidations that limit patient access," said the Alliance for Site Neutral Payment Reform, which includes the America's Health Insurance Plans and the American Academy of Family Physicians associations among its members.
AARP, the influential seniors' organization, welcomed the provision as a trade-off to prevent an impending increase in the contribution that some people on Medicare would have had to make to the program, the so-called Part B premiums. The "more equitable payment levels for new off-campus outpatient departments" are a "reasonable" way to "reduce cost without harming beneficiaries," said the top lobbying group for older Americans.
Still, the bid to cut off a path to higher payments for off-campus units of hospitals through the budget deal seems a bold step on the part of Congress, said Carrie Williams Bullock, director in reimbursement and product commercialization services at the Avalere health consulting group.
"Congress would be making a move that implies that this is a policy problem that needs to be solved," a stance that the Centers for Medicare and Medicare Services has not yet taken, Bullock said.
The impact of this change would be tempered in that it would apply only to newly purchased offices, she said. But Congress and CMS have tended to move more slowly in addressing payment disparities in which Medicare spends more on a particular health service if it's delivered in a certain location. CMS and Congress, for example, are in the midst of extensive research on how well people fare when treated in different settings after hospital stays for serious illness or injury, a field of medicine known as post-acute care.
CMS has begun only in roughly the past year to gather hard data on how commonly hospitals are buying practices, yet Congress is poised to press ahead with a large shift in payment policies for the acquired practices through the budget deal, Bullock said.