On April 13, 2016, the Government Accountability Office (GAO) released another report once again recommending that Congress equalize payment rates for Medicare services across practice settings (e.g., hospital outpatient setting and a physician office).  

GAO claims that certain healthcare services can be performed in multiple settings but have shifted from the physician office setting to more costly hospital settings, particularly Evaluation & Management services.  GAO does not attempt to analyze why costs are higher in hospital outpatient departments, which CMS has long acknowledged are the result of increased quality, staffing and coordination that hospitals provide and independent physician practices do not.  GAO attributes some of this change to “vertical consolidation” where hospitals acquire physician practices or hire physicians directly. As a result, many services that were once reimbursed at a lower payment rate when performed in the physician office setting are now classified as hospital outpatient department services and thus reimbursed at a higher rate.

Accordingly, GAO recommends that Medicare equalize such payments. GAO made the same recommendation in a December 2015 GAO Report.

The April 2016 GAO Report is available here.

Reporter, Lauren S. Gennett, Atlanta, + 1 404 572 3592, lgennett@kslaw.com.