Addressing Medicare payment differ

across settings: Ambulatory care se

Dan Zabinski and Ariel Winter

March 7, 2013
Overview

 Importance of addressing payment 

differences across settings 

 Aligning payment rates across setting

E&M visits and additional services

 Impact on spending, cost sharing, ho Mitigating impact on hospitals that se

many low-income patients
Growth of hospital employment o

physicians  Number of physicians employed by 

hospitals increased by 55% from 2002011 (AHA survey)

 Share of cardiologists employed by 

hospitals grew from 11% to 35% from 2007-2012 (ACC survey) 
Number of services per beneficiary growfaster in OPDs than freestanding office2010-2011Type of service

Growth in freestanding office

Growth in OPD

Share serviceOPDs, 

E&M office visits -0.2% 7.8% 9.Echocardiogram (without contrast)

-6.3 17.6 2

Nuclear cardiology -12.0 13.6 3

Note: E&M (evaluation and management). Data are preliminary and subject to chan

Source: MedPAC analysis of Medicare claims, 2010-2011
If migration to OPDs continues a

current rate... Medicare spending on E&M visits would 

$1.2 billion higher per year by 2021 due shift in site of care; beneficiary cost shawould be $310 million higher

 Medicare spending on echocardiograms 

nuclear cardiology studies would be $1.billion higher per year by 2021; cost shawould be $285 million higher

Data are preliminary and subject to change
Principles for paying for same service in different settings

 Patients should have access to settin

that provide appropriate level of care

 Prudent purchaser should not pay mo

a service in one setting than another

 Medicare should base payment rates 

resources needed to treat patients in lowest-cost, clinically appropriate sett
Reasons why payment rates shodiffer by setting for certain servic Hospitals incur costs related to stand

capacity for emergencies and regulatrequirements

 Patient severity may be greater in OP Outpatient PPS more likely to combin

primary service with ancillaries into a single payment (packaging)
Recommendation to equalize rates fo

E&M visits across settings (March 20 Standby capacity/emergency care should n

affect costs of E&M visits outside of ED

 CPT codes reflect differences in patient 

complexity

 Level of packaging only slightly higher in 

outpatient PPS than in PFS

 3 year phase-in, stop-loss policy for hospita

with high share of low-income patients

 Annual total savings: $820 million  Annual cost sharing savings: $190 million 
Additional services that meet principfor aligning payment rates between settings 

 66 APCs for which payments could be 

equalized between OPDs and offices, odifferences could be narrowed (Groups 2)

 3 cardiac imaging APCs for which paym

could be equalized between OPDs and offices

 12 APCs for which payments could be 

equalized between OPDs and ASCs
Groups 1 and 2: Payments could be 

equalized or differences could be narro

> 50% in offices< 5% packaging< 10% in EDsPatient severity no greater in OPD< 5% 90 day global codes24 APCs

Group 2 (narrow pdifferences)

> 50% in offices> 5% packaging< 10% in EDsPatient severity no in OPD< 5% 90 day globa42 APCs

Group 1 (equal payments across settings)
Impact of changing payment rates for A

in Groups 1 and 2 on spending and cossharing Would reduce program spending and 

beneficiary cost sharing by $900 milli

 Amount beneficiaries save in cost sha

depends on method for determining copayment in each APC

 Decrease in cost sharing would be $140 

million to $380 million

 As savings in cost sharing increase, am

program saves declines

Data are preliminary and subject to change
Impact of changing payment rates for A

in Groups 1 and 2 on hospital revenue Would reduce overall hospital Medicare 

revenue by 0.6% and OPD revenue by 

 Greater impact on rural hospitals

 Combined with E&M policy, would reduc

overall revenue by 1.2% and OPD reveby 5.4%

 Greater impact on rural, major teaching, an

government hospitals

Data are preliminary and subject to change
Mitigating impact of payment 

changes on hospitals Concern: Impact on access to ambulato

services for low-income patients

 Policy to mitigate impact on hospitals th

serve low-income patients

 Based on share of low-income patients in O

inpatient setting?

 Use DSH as a proxy? Stop-loss protection or pool of dollars?

 Illustrative example: Limit losses to 2% 

overall revenue for hospitals that have Dmedian (25.6%)
Stop-loss: Little effects on Groups 1 an

alone; important when combined w/ E&

Category Groups 1 & 2

Groups 1 & 2, 

stop-loss

Groups 1 & 2 + 

E&M

G

All hospitals 0.6% 0.6% 1.2% Rural 0.9 0.9 1.7 Urban 0.5 0.5 1.1 Nonprofit 0.6 0.6 1.1 For profit 0.5 0.5 0.8 Government 0.6 0.6 1.6 Major teach 0.5 0.5 1.7 Other teach 0.5 0.5 0.9 Nonteaching 0.6 0.6 1.1 

Data are preliminary and subject to change 
Aligning payment rates between OPDs 

physicians’ offices for cardiac imaging A Focus on 3 APCs that include cardiac 

imaging services (269, 270, 377)

 Rapid migration from offices to OPDs Share of cardiologists employed by hos

has tripled

 Payment rates substantially higher in O Would reduce program spending and co

sharing by ~$500 million per year

 Beneficiaries would save ~$100 million

Data are preliminary and subject to change
Reduction in overall Medicare revenue 

reducing OPD payments for cardiac imAPCs and E&M visitsCategory Cardiac APCs

Cardiac APCs, 

stop-loss

Cardiac APCs

+ E&M

C

All hospitals 0.3% 0.3% 0.9% Rural 0.5 0.5 1.3 Urban 0.3 0.3 0.9 Nonprofit 0.3 0.3 0.9 For profit 0.3 0.3 0.5 Government 0.3 0.3 1.3 Major teach 0.3 0.3 1.4 Other teach 0.3 0.3 0.7 Nonteaching 0.4 0.4 0.8 

Data are preliminary and subject to change 
Characteristics of 100 most affechospitals: Cardiac imaging APCs 

 Relative to all other hospitals:

 More rural, nonprofit Fewer major teaching, for-profit Far fewer beds Similar DSH percentage 6 specialty hospitals

Data are preliminary and subject to change
Equal payment rates between OPDs an

ASCs for 12 APCs commonly done in A OPD rates for most ambulatory procedu

78% higher than ASC rates

 Gap in payment rates has widened Criteria for services that could have equ

rates between settings

 Frequently performed in ASCs (more than 5

time)

 Infrequently provided with an ED visit (less 

10%)

 Patient severity no greater in OPDs than AS
Impact of equalizing payment rates fo

APCs on spending and cost sharing Would reduce program spending and co

sharing by $590 million per year

 Cost sharing would decline between $4

million and $220 million, depending on hOPD copayments are determined

Data are preliminary and subject to change
Reduction in overall Medicare revenue 

reducing OPD payments for 12 APCs aE&M visitsCategory 12 APCs

12 APCs, 

stop-loss

12 APCs + 

E&M

E&

All hospitals 0.4% 0.4% 1.0% Rural 0.7 0.6 1.4 Urban 0.3 0.3 0.9 Nonprofit 0.4 0.3 0.9 For profit 0.4 0.4 0.6 Government 0.4 0.4 1.4 Major teach 0.3 0.3 1.4 Other teach 0.3 0.3 0.7 Nonteaching 0.5 0.5 0.9 

Data are preliminary and subject to change 
Characteristics of 100 most affechospitals: 12 APCs

 Relative to other hospitals

 More likely to be rural, for-profit Far fewer beds Less likely to be nonprofit, major teac Much lower average DSH percentage 61 specialty hospitals

Data are preliminary and subject to change
Summary: Additional services that mprinciples for aligning payment rates between settings 

 66 APCs for which payments could b

equalized between OPDs and officesdifferences could be narrowed (Groupand 2)

 3 cardiac imaging APCs for which 

payments could be equalized 

 12 APCs for which payments could b

equalized between OPDs and ASCs
Summary: Impact on overall hospital Medicare revenue and spending

Revenue 

reduction

Revenue 

reduction, 

including 

E&M 

policy

Overall 

savings 

(millions)

Be

(

Groups 1 and 2 (66 APCs) 0.6% 1.2% $900 $13 cardiac imaging APCs 0.3 0.9 500 12 APCs commonly done in ASCs

0.4 1.0 590 

Data are preliminary and subject to change
For discussion

 Questions about analysis Discussion of additional services that 

principles for aligning payment rates between settings 

 Discussion of ways to reduce benefic

cost sharing, mitigate impact on hospthat serve low-income patients