The Medicare Payment Advisory Commission (MedPAC)  met on December 12-13, 2013, to discuss draft recommendations regarding 2015 payment updates for Medicare providers.  MedPAC, which is responsible for issuing an annual report to Congress on Medicare payment policy every March, will reconvene in January to vote on final recommendations for 2015.  As with last year’s draft recommendations, MedPAC did not consider the impact of sequestration on the payment rates.

Most notably, MedPAC’s draft recommendations include an increase of 3.2% in the payment rates for acute care hospital inpatient and outpatient prospective payment systems (PPS).  In light of the cuts provided for by the Patient Protection and Affordable Care Act to disproportionate share hospital payments, MedPAC determined that a 3.2% increase would bring the overall update for fiscal year 2015 to 0.3%.  Under current law, the overall update would be -1.3%.

In addition to increasing PPS payments, MedPAC recommended a reduction or elimination in the differences in payment rates for outpatient departments and physician offices for certain ambulatory payment classifications.  MedPAC also proposed to equalize the long-term acute care hospital payment rate to the inpatient PPS rate for non-chronically critically ill cases.  The savings would then be redistributed to create additional outlier payments for chronically critically ill cases in inpatient PPS hospitals. 

Finally, MedPAC recommended eliminating payment updates for skilled nursing facilities, inpatient rehabilitation facilities, long-term care hospitals, and hospice agencies.  These providers are projected to have positive margins in fiscal year 2015 based on the current law.  MedPAC did not address physician payment rates, but rather reinstated its proposal to repeal and replace the sustainable growth rate formula.

Reporter, Paige Fillingame, Houston, +1 713 615 7632, pfillingame@kslaw.com.