Continuing rise in health care costs in the United States, the Affordable Care Act (ACA), and a
multitude of other regulations impact providers in 2013. Despite federal spending slowing in the
past 2 years, the Board of Medicare Trustees believes that cost savings are only achievable if health
care providers are able to realize productivity improvements at a quicker pace than experienced
historically. Consequently, the re-engineering of U.S. health care and bridging of the divide
between health and health care have been proposed beyond affordable care.
Thus, the Medicare Payment Advisory Commission (MedPAC) envisions alignment of Medicare
payment systems to eliminate variable rates for the same ambulatory services provided to similar
patients in different settings, such as the physician’s office, hospital outpatient departments (HOPDs),
and ambulatory surgery centers (ASCs). MedPAC believes that if 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. MedPAC is also concerned that payment variations across settings encourage arrangements
among providers that result in care being provided in high paid settings. MedPAC recommends that
payment rates be based on the resources needed to treat patients in the most efficient setting, adjusting
for differences in patient severity, to the extent the severity differences affect costs.
MedPAC has analyzed the costs of evaluation and management (E&M) services and the differences
between providing them in a HOPD setting compared to a physician office setting, echocardiography
services, and multiple services provided in ASCs and HOPDs. MedPAC has shown that for an
established patient office visit (CPT 99213) provided in a free-standing physician’s office, the program
pays the physician 70% less than in HOPD setting with a payment for physician practice of $72.50
versus $123.38 for HOPD setting. Similarly, for a Level II echocardiogram, HOPD costs 141% more for
the same service than a free-standing office ($188.31 versus $452.89). For interventional techniques,
Medicare payments vary from physician office to HOPD setting, with $211.96 in an office setting,
$407.28 in ASC setting, and $655.62 in HOPD for procedures such as epidural injections.
The MedPAC proposal for changing HOPD payment rates for services would reduce program
spending and result in beneficiary cost sharing by $900 million in one year. On average, hospitals’
overall Medicare revenue will decline by 0.6% and HOPD revenue would fall by 2.7%. Further,
MedPAC provided a specific example that aligning payment rates between HOPDs and freestanding offices only for cardiac imaging services would reduce program spending and beneficiary
cost sharing by $500 million in one year. In estimating the savings that would be realized by
equalizing payment rates between HOPDs and ASCs for certain ambulatory surgical procedures,
MedPAC have shown potential Medicare program spending and beneficiary cost savings to be
about $590 million per year.
The impact of the proposed policies that are discussed in this manuscript would result in savings
of approximately $1.5 billion per year for Medicare. MedPAC also has recommended a stop-loss
policy that would limit the loss of Medicare revenue for those hospitals.
Key words: Medicare, health care delivery system, Medicare Payment Advisory Commission
(MedPAC), hospital outpatient departments (HOPDs), ambulatory surgery centers (ASCs), physician
office practices
Reducing Racial Health Care Disparities
