Medicare payment advisors unanimously approved a recommendation Thursday to update hospital payment by 2% for fiscal 2023, and to keep physician fee schedule payment stagnant next year.
But members of the Medicare Payment Advisory Commission continued to voice concerns about the long-term viability of the current physician fee schedule model, which they say isn’t keeping up with inflation during a particularly volatile time for healthcare providers.
MedPAC assesses the adequacy of Medicare payments by sector each year. The commission examines factors like access to care, access to capital and Medicare payments. To guide their 2023 draft recommendations, staff used 2020 data, which is colored by the COVID-19 public health emergency. But MedPAC believes most of the PHE’s effects on the health system will be temporary, and thus shouldn’t be tackled through fee schedule updates.
The commission agreed that this should translate into updating hospital payment by the amount determined under current law, which is expected to be 2% for 2023.
However, Commissioner Brian DeBusk, CEO of medical equipment manufacturer DeRoyal Industries, noted that 2023 will be the second year of extreme shifts in costs for hospitals’ labor and materials. The Centers for Medicare and Medicaid Services’ market basket, which reflects inflation facing providers and is used to update the payment system for hospitals, will have to reflect dynamics like increasing nursing costs, supply chain back-ups and more, he said.
“I hope that hospitals and other authoritative sources will provide CMS with the information they need… I think it’s going to be more obvious that these fundamental input costs have shifted, and shifted dramatically,” he said.
MedPAC also voted to recommend no increase to physician payment through the physician fee schedule in 2023, also consistent with law, despite concerns that the suggestion would lead to underpaying providers in the current high-inflation environment.
The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) dictates a 0% raise for physician pay through the fee schedule, opting instead to offer raises through quality payment programs.
MedPAC staff’s report on the adequacy of payment to physicians doesn’t show that a departure from law is necessary for 2023, but MedPAC needs to think about deeper, long-term fixes to the model, Commissioner Dr. Lawrence Casalino, a professor at Weill Cornell Graduate School of Medical Sciences, said.
A 45% of the physician fee schedule is the practice expense, or resources involved in providing medical services at a medical practice, according to DeBusk. Since the fee schedule doesn’t have a market basket update that accounts for inflation like the hospital payment system does, hospitals could see a significantly different update than physicians. This might drive more physicians to seek employment at hospitals, he said.
“Hospital employment of physicians may or may not be a good thing. But if it happens, it should happen for good reasons, not because it’s driven by differential payment updates,” Casalino said, agreeing with DeBusk.
Commissioner Lynn Barr, leader of Caravan Health, which guides providers through value-based care, emphasized that Congress should continue to step in until there’s a more permanent fix to the fee schedule. Congress passed a 3% increase in pay for providers paid physician fee schedule last month.
“I worry a little bit about a slap in the face to the people that are really on the frontlines, but it is what it is,” Barr said.
Indeed, providers are already pushing back against MedPAC’s suggestion.
“It’s hard to conceive of a more misguided recommendation… Physician practices are dealing with massive staffing shortages and skyrocketing expenses. By ignoring this reality, MedPAC is essentially recommending that Congress do nothing to keep Medicare payments up to date with inflation,” Anders Gilberg, senior vice president of government affairs for the Medical Group Management Association, said in a statement.
MedPAC Chair Michael Chernew, a professor at Harvard Medical School, indicated the commission could discuss broader problems with the physician fee schedule in the future.
MedPAC also voted unanimously to recommend a 5% decrease in base payment to skilled nursing facilities, inpatient rehabilitation facilities and home health agencies. The commission further suggested a reimbursement bump for long-term care hospitals and to keep rates unchanged for hospice providers. MedPAC recommended to update dialysis facility base payment by the amount determined under current law and eliminate the 2022 conversion factor for ambulatory surgical centers.
Additionally, MedPAC recommended requiring home health agencies to report telehealth services provided during a 30-day period, requiring clinicians to track audio-only services through Medicare claims and requiring ambulatory surgical centers to report cost data to help guide future payment updates.