MedPAC: Hospital Payments Should Increase by 1%

The Medicare Payment Advisory Commission recently released (pdf) its final Medicare payment policy report to Congress, recommending hospital payment rates for both inpatient and outpatient services increase by 1 percent in 2013.

MedPAC based its 1 percent hospital inpatient increase on three main factors: Most payment adequacy indicators are positive; hospitals' documentation and coding changes led to overpayments over the past three years; and although some hospitals generated positive overall Medicare margins in 2010, most hospitals had negative Medicare margins.

For hospital outpatient services, MedPAC also proposed a 1 percent increase. Although the volume of outpatient services has been growing significantly, most overall hospital Medicare margins are negative, "suggesting a positive update is appropriate," according to the report.

In addition to the hospital payment recommendations, which were similar to proposals in December and January meetings, MedPAC said Congress must repeal the sustainable growth rate — Medicare's method for updating physician payments. It argued that the short-term patches undermine the credibility of Medicare and cause undue frustration among all healthcare providers. MedPAC also recommended Congress repeal the SGR as soon as possible because the cost of repeal is increasing exponentially with every temporary fix, and the costs of the SGR will only become more difficult to offset.

MedPAC said the SGR should be repealed and replaced with specified updates. The updates include a payment freeze at current levels for primary care physicians, and specialist physicians would see annual payment reductions of 5.9 percent for three years followed by a payment freeze.

More Articles on MedPAC:

MedPAC: Medicare Payments Adequate for Rural Hospitals

MedPAC Recommends 1% Increase for Hospital Inpatient, Outpatient Services

MedPAC Releases FY 2013 Hospital Payment Recommendations

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