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Medicare adviser backs hospital payment increase, freeze for hospices in 2021

A congressional Medicare adviser will recommend an increase in 2021 Medicare payments for hospital services and payment decreases for home health agencies and inpatient rehabilitation facilities.

The Medicare Payment Advisory Commission, or MedPAC, voted on nine separate 2021 payment recommendations during a Jan. 16 meeting.

Along with the increase for hospitals and decreases for home health and inpatient rehabilitation facilities, the commission will recommend to Congress payment freezes for hospice providers and ambulatory surgical centers.

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MedPAC is a Medicare adviser for Congress and delivers policy and payment recommendations in March and June reports; it does not have legislative authority. The commission will present the Jan. 16 recommendations in its March report.

Payment increase for hospitals

The commission will recommend a 2% Medicare payment rate increase for inpatient and outpatient hospital services in 2021 compared to the 2020 rate. The recommendation will also include a 0.8% increase that would go to a hospital value incentive program if it is enacted by Congress.

Enacting the new program would also eliminate 0.5% in penalties under the current system, which would make the net payment rise 3.3%.

Warner Thomas, commissioner and president and CEO of Ochsner Health System, a New Orleans-based health system, ultimately supported the recommendation but was concerned that hospitals' Medicare margins are negative, even for efficient hospitals.

Medicare margins for hospitals improved in 2018 but were at negative 9.3%, and margins are projected to be negative 8% in 2020. Even for efficient providers, average margins were at negative 2% in 2018. While Medicare margins were low, all-payer margins totaled 6.8% in 2018, close to an all-time high, according to MedPAC.

Thomas expressed concern about making the recommendation dependent on the implementation of the value incentive program because he believes that Congress is not likely to do this in the next year.

If the program is not implemented, the recommendation would not move forward and payments would increase by the 2.8% currently outlined.

The commission will also recommend raising the 2020 payment rate for long-term care hospitals by 2% in 2021.

Hospice pay freeze, cap adjustment

MedPAC will recommend no payment increase for hospice providers in 2021 due to the comfortable Medicare margins these facilities receive.

Overall, the commission projects that Medicare margins will be 12.6% in 2020. However, margins for hospice providers have some of the highest variations of any facility type.

The top 20% of providers in terms of beneficiaries' length of stay past 180 days had Medicare margins of 17.8%, and the second-highest quintile had margins of 22.1%. Meanwhile, the lowest 20% of providers according to the same metric had Medicare margins of minus 4.5%, and the second-lowest quintile had margins of 7%, according to the commission.

Along with the payment freeze, a 20% reduction to hospice providers' annual payment cap will also be recommended.

The Centers for Medicare and Medicaid Services has a cap on total annual Medicare payments to hospice providers to ensure that Medicare payments do not unnecessarily increase beyond the cost of care, according to the commission's March 2019 report.

While the cap is meant to reflect per-patient spending, it is relative to a provider's overall spending. The cap is not enforced according to each individual patient's episode of care.

Kim Neuman, a principal policy analyst for MedPAC, said reducing the cap will generate Medicare savings and will better group providers according to similar characteristics, like for-profit providers, disproportionately longer beneficiary stays and higher margins.

Decrease for home health agencies, inpatient rehabilitation facilities

The commission will recommend a 7% decrease for home health agencies in 2021 due to Medicare margins that are projected to rise.

Evan Christman, a senior analyst for the commission, said during a December 2019 meeting that average Medicare margins are projected to rise from 15.3% in 2018 to 17% in 2020. A 7% payment decrease in 2021 should not affect beneficiaries' access to care, but it may increase cost pressures for certain providers, according to Christman.

Commissioners also passed a recommendation for a 5% pay decrease for inpatient rehabilitation facilities in 2021. The facilities' aggregate Medicare margins were 14.7% in 2018 and are projected to drop to 12.7% in 2020.

The commission will make two recommendations on ambulatory surgical centers: first, that the U.S. Department of Health and Human Services require the facilities to report cost data, and second, that the 2020 Medicare payment rate not increase in 2021 if cost data is not reported.

MedPAC will also recommend not updating 2020 payment rates for skilled nursing facilities in 2021. It will also recommend there be no additional pay increases for dialysis centers and physicians and healthcare professionals other than what is outlined in current law.