MedPAC’s rural Medicare payment recommendations and studies

1. MedPAC’s rural Medicare payment recommendations and studies Jeffrey Stensland August 28, 2007 Opinions expressed today are my own and do not necessarily reflect the views of MedPAC or any of its commissioners

2. Medicare Payment Advisory Commission • 17 national experts • Nominated by Comptroller General for 3-year terms; can be renominated • Make recommendations to the Congress and the Secretary of HHS • Vote on recommendations in public • Two standing reports to Congress; also various mandated reports

3. Promoting efficiency • Section 1805 of the Social Security Act requires MedPAC to: • Make recommendations to Congress concerning Medicare payment policies • Review factors affecting expenditures for the efficient provider of services

4. Promoting equity The Commission has tended to recommend paying providers in the same market the same payment rates. - Ensure ASCs rates do not exceed hospital outpatient department rates (March 2004) - Do not pay Medicare Advantage plans more than the cost of FFS care (June 2005) - Give hospitals in the same town the same wage index (March 2007)

5. MedPAC rural recommendations to Congress that have been enacted • “The Congress should raise the cap on the disproportionate share add-on a rural hospital can receive from 5.25 percent to 10 percent.” (cap raised in 2003) • “The Congress should enact a low-volume adjustment to the rates used in the inpatient PPS.” (enacted in 2003) • “The Congress should raise the inpatient base rate for hospitals in rural and other urban areas to the level of the rate for those in large urban areas, phased in over two years.” (enacted in 2003)

6. Recent MedPAC recommendations to CMS with rural implications • “The Secretary should require the peer review organizations to include rural populations and providers when carrying out their quality improvement activities.” • Recommendations for the Relative Value Scale Update Committee (RUC)

7. Mandated studies • Critical Access Hospitals • Rural provisions of the MMA

8. Findings from the CAH study • CAHs inpatient, outpatient, and post-acute Medicare revenue rose by roughly $1,075,000 per CAH from 1998 to 2003. • This is about $750,000 more than if the hospitals’ revenue had risen at the rate of the comparison group.

9. Future CAH research directions • Old research • Lump all CAHs into one group • Focus on benefits to the hospital • Potential new directions • Differentiate between types of CAHs • Focus on how CAHs affect patients

10. The type of value provided to patients differs among CAHs • Isolated CAH (over 35 miles to the next facility) • Small-town CAH (10-20 miles from next facility) • Low-tech alternative to nearby high-tech hospital • Nursing home CAH (limited capabilities)

11. Implications of the MMA • MMA provisions increased rural hospital Medicare payments by $377 million per year (2.3% increase in PPS hospital payments) • Rural Medicare margins (-3.0%) exceeded urban (-3.3%) for the first time in 2005.