MedPAC Recommends Key Reimbursement Changes

June 2018

Medicare Reimbursement Update

By Linda Rouse O'Neill
Vice President, Government Affairs

The Medicare Payment Advisory Commission (MedPAC) has released its 2018 report to Congress. This year, the report calls for a number of cuts to Medicare fee-for-service payments, mainly to post-acute care providers. Additionally, MedPAC has called for the elimination of the Merit-Based Incentive Payment System (MIPS), which is the newly implemented payment system for physicians.

Congress is not obliged to follow these recommendations, and, in light of upcoming midterm elections, it is highly unlikely that lawmakers will undertake any significant payment reform. Legislative change always remains a possibility, however, and these recommendations may inform future reform efforts. Here is a look at some key highlights from this year’s report.

Post-Acute Providers
Skilled Nursing Facilities. MedPAC recommends eliminating the market basket update for skilled nursing facilities for fiscal years (FYs) 2019 and 2020. The agency also calls for implementing a redesigned prospective payment system (PPS) in 2019 for these providers. The aim of this redesigned system is to shift payments to medically complex patient stays.

Home Health and Hospice. The agency recommends Congress cut Medicare payments to home health agencies by 5% in CY 2019 and rebase this payment system beginning in CY 2020. As part of this rebasing, MedPAC also recommends Congress direct HHS to revise the home health agency PPS to eliminate the use of therapy visits as a factor in payment determinations.

Merit-Based Incentive Payment Program. As noted earlier, MedPAC has called for the elimination of MIPS in its current form and recommends a new voluntary program be established. Under this program, providers could elect to be measured as part of a voluntary group. Clinicians in these voluntary groups could qualify for a value payment based on their group’s performance on a set of population-based measures.

This announcement comes after many providers reported confusion and difficulty when preparing for the new payment system, which required physicians to start reporting in January 2017 to impact their payment in 2019. Efforts to comply with the law drove provider interest in software and regulatory consulting services, and the Centers for Medicare and Medicaid Services has taken steps to help physicians prepare. It is unlikely Congress will take steps to eliminate MIPS as it passed with overwhelming bipartisan support. However, reducing regulatory burdens and compliance costs for providers remains a key priority for the Trump Administration.

Acute Care
Inpatient And Outpatient. MedPAC recommends that for 2019, Congress should update the 2018 Medicare base payment rates (inpatient and outpatient) for acute care hospitals by the amount determined under current law. This means these payers would receive a small payment increase. MedPAC also highlighted that hospitals’ aggregate Medicare margin were – 9.6% in 2016. However, MedPAC also says the average Medicare payment is lower than average costs, but higher than the variable costs of treating a Medicare patient.

Ambulatory Surgical Centers (ASCs). MedPAC recommends that Congress eliminate the CY 2019 update to Medicare payment rates for ASCs. It also repeated a previous recommendation that the HHS Secretary require ASCs to report cost data.

If you would like to learn more about the MedPAC report, or how it may affect your customers, please contact us at

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