Addressing Medicare payment differencesacross settings: Ambulatory care servicesDan Zabinski and Ariel WinterMarch 7, 2013OverviewImportance of addressing paymentdifferences across settingsAligning payment rates across settings forE&M visits and additional servicesImpact on spending, cost sharing, hospitalsMitigating impact on hospitals that servemany low-income patients2Growth of hospital employment ofphysiciansNumber of physicians employed byhospitals increased by 55% from 2003-2011 (AHA survey)Share of cardiologists employed byhospitals grew from 11% to 35% from2007-2012 (ACC survey)34Number of services per beneficiary growingfaster in OPDs than freestanding offices,2010-2011Type of serviceGrowth infreestandingofficeGrowth inOPDShare ofservices inOPDs, 2011E&M office visits -0.2% 7.8% 9.7%Echocardiogram(withoutcontrast)-6.3 17.6 29.6Nuclearcardiology-12.0 13.6 33.0Note: E&M (evaluation and management). Data are preliminary and subject to changeSource: MedPAC analysis ofMedicare claims, 2010-2011If migration to OPDs continues atcurrent rate...Medicare spending on E&M visits would be$1.2 billion higher per year by 2021 due toshift in site of care; beneficiary cost sharingwould be $310 million higherMedicare spending on echocardiograms andnuclear cardiology studies would be $1.1billion higher per year by 2021; cost sharingwould be $285 million higher5Data are preliminary and subject to change6Principles for paying for sameservice in different settingsPatients should have access to settingsthat provide appropriate level of carePrudent purchaser should not pay more fora service in one setting than anotherMedicare should base payment rates onresources needed to treat patients inlowest-cost, clinically appropriate setting7Reasons why payment rates shoulddiffer by setting for certain servicesHospitals incur costs related to standbycapacity for emergencies and regulatoryrequirementsPatient severity may be greater in OPDsOutpatient PPS more likely to combineprimary service with ancillaries into asingle payment (packaging)Recommendation to equalize rates forE&M visits across settings (March 2012)Standby capacity/emergency care should notaffect costs of E&M visits outside of EDCPT codes reflect differences in patientcomplexityLevel of packaging only slightly higher inoutpatient PPS than in PFS3 year phase-in, stop-loss policy for hospitalswith high share of low-income patientsAnnual total savings: $820 millionAnnual cost sharing savings: $190 million89Additional services that meet principlesfor aligning payment rates betweensettings66 APCs for which payments could beequalized between OPDs and offices, ordifferences could be narrowed (Groups 1 and2)3 cardiac imaging APCs for which paymentscould be equalized between OPDs andoffices12 APCs for which payments could beequalized between OPDs and ASCsGroups 1 and 2: Payments could beequalized or differences could be narrowed10> 50% in offices< 5% packaging< 10% in EDsPatient severity no greaterin OPD< 5% 90 day global codes24 APCsGroup 2 (narrow paymentdifferences)> 50% in offices> 5% packaging< 10% in EDsPatient severity no greaterin OPD< 5% 90 day global codes42 APCsGroup 1 (equal paymentsacross settings)Impact of changing payment rates for APCsin Groups 1 and 2 on spending and costsharingWould reduce program spending andbeneficiary cost sharing by $900 millionAmount beneficiaries save in cost sharingdepends on method for determiningcopayment in each APCDecrease in cost sharing would be $140million to $380 millionAs savings in cost sharing increase, amountprogram saves declines11Data are preliminary and subject to changeImpact of changing payment rates for APCsin Groups 1 and 2 on hospital revenueWould reduce overall hospital Medicarerevenue by 0.6% and OPD revenue by 2.7%Greater impact on rural hospitalsCombined with E&M policy, would reduceoverall revenue by 1.2% and OPD revenueby 5.4%Greater impact on rural, major teaching, andgovernment hospitals12Data are preliminary and subject to changeMitigating impact of paymentchanges on hospitalsConcern: Impact on access to ambulatoryservices for low-income patientsPolicy to mitigate impact on hospitals thatserve low-income patientsBased on share of low-income patients in OPD orinpatient setting?Use DSH as a proxy?Stop-loss protection or pool of dollars?Illustrative example: Limit losses to 2% ofoverall revenue for hospitals that have DSH >median (25.6%)13Stop-loss: Little effects on Groups 1 and 2alone; important when combined w/ E&MCategory Groups 1 & 2Groups 1 & 2,stop-lossGroups 1 & 2 +E&MGroups 1 & 2+ E&M,stop- lossAll hospitals0.6% 0.6% 1.2% 1.0%Rural 0.9 0.9 1.7 1.6Urban 0.5 0.5 1.1 0.9Nonprofit 0.6 0.6 1.1 1.0For profit 0.5 0.5 0.8 0.7Government 0.6 0.6 1.6 1.2Major teach 0.5 0.5 1.7 1.3Other teach 0.5 0.5 0.9 0.9Nonteaching 0.6 0.6 1.1 1.014Data are preliminary and subject to changeAligning payment rates between OPDs andphysicians’ offices for cardiac imaging APCsFocus on 3 APCs that include cardiacimaging services (269, 270, 377)Rapid migration from offices to OPDsShare of cardiologists employed by hospitalshas tripledPayment rates substantially higher in OPDsWould reduce program spending and costsharing by ~$500 million per yearBeneficiaries would save ~$100 million15Data are preliminary and subject to changeReduction in overall Medicare revenue fromreducing OPD payments for cardiac imagingAPCs and E&M visitsCategory Cardiac APCsCardiac APCs,stop-lossCardiac APCs+ E&MCardiac APCs+ E&M,stop-lossAll hospitals0.3% 0.3% 0.9% 0.8%Rural 0.5 0.5 1.3 1.2Urban 0.3 0.3 0.9 0.8Nonprofit 0.3 0.3 0.9 0.8For profit 0.3 0.3 0.5 0.5Government 0.3 0.3 1.3 1.0Major teach 0.3 0.3 1.4 1.1Other teach 0.3 0.3 0.7 0.7Nonteaching 0.4 0.4 0.8 0.716Data are preliminary and subject to change17Characteristics of 100 most affectedhospitals: Cardiac imaging APCsRelative to all other hospitals:More rural, nonprofitFewer major teaching, for-profitFar fewer bedsSimilar DSH percentage6 specialty hospitalsData are preliminary and subject to changeEqual payment rates between OPDs andASCs for 12 APCs commonly done in ASCsOPD rates for most ambulatory procedures78% higher than ASC ratesGap in payment rates has widenedCriteria for services that could have equalrates between settingsFrequently performed in ASCs (more than 50% oftime)Infrequently provided with an ED visit (less than10%)Patient severity no greater in OPDs than ASCs18Impact of equalizing payment rates for 12APCs on spending and cost sharingWould reduce program spending and costsharing by $590 million per yearCost sharing would decline between $40million and $220 million, depending on howOPD copayments are determined19Data are preliminary and subject to changeReduction in overall Medicare revenue fromreducing OPD payments for 12 APCs andE&M visitsCategory 12 APCs12 APCs,stop-loss12 APCs +E&M12 APCs +E&M, stop-lossAll hospitals0.4% 0.4% 1.0% 0.8%Rural 0.7 0.6 1.4 1.3Urban 0.3 0.3 0.9 0.8Nonprofit 0.4 0.3 0.9 0.9For profit 0.4 0.4 0.6 0.6Government 0.4 0.4 1.4 1.1Major teach 0.3 0.3 1.4 1.2Other teach 0.3 0.3 0.7 0.7Nonteaching 0.5 0.5 0.9 0.820Data are preliminary and subject to change21Characteristics of 100 most affectedhospitals: 12 APCsRelative to other hospitalsMore likely to be rural, for-profitFar fewer bedsLess likely to be nonprofit, major teachingMuch lower average DSH percentage61 specialty hospitalsData are preliminary and subject to change22Summary: Additional services that meetprinciples for aligning payment ratesbetween settings66 APCs for which payments could beequalized between OPDs and offices, ordifferences could be narrowed (Groups 1and 2)3 cardiac imaging APCs for whichpayments could be equalized12 APCs for which payments could beequalized between OPDs and ASCs23Summary: Impact on overall hospitalMedicare revenue and spendingRevenuereductionRevenuereduction,includingE&MpolicyOverallsavings(millions)Beneficiarysavings(millions)Groups 1 and 2(66 APCs)0.6% 1.2% $900 $140 - $3803 cardiacimaging APCs0.3 0.9 500 10012 APCscommonly donein ASCs0.4 1.0 590 40-220Data are preliminary and subject to change24For discussionQuestions about analysisDiscussion of additional services that meetprinciples for aligning payment ratesbetween settingsDiscussion of ways to reduce beneficiarycost sharing, mitigate impact on hospitalsthat serve low-income patients