Traditional Medicare Provider Payment—Hospitals

Background

MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). pays for hospital inpatient and outpatient services using a prospective payment system ( PPSProviders receive a predetermined fee based on a patient’s diagnosis and other factors that affect providers’ costs, such as local wage levels. The amount is intended to reflect the typical cost of treating similar patients.  ). As a rule, the PPSProviders receive a predetermined fee based on a patient’s diagnosis and other factors that affect providers’ costs, such as local wage levels. The amount is intended to reflect the typical cost of treating similar patients.  provides a single payment for a group of related services. For example., hospitalization for a specific condition or care related to an outpatient procedure. In addition to paying for beneficiary services, MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). subsidizes teaching hospitals and covers uncompensated care costs of facilities that serve a disproportionate share of individuals with low incomes or those who are uninsured. MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). also subsidizes certain rural hospitals, such as Critical Access Hospitals and certain comprehensive cancer hospitals that are not paid under the PPSProviders receive a predetermined fee based on a patient’s diagnosis and other factors that affect providers’ costs, such as local wage levels. The amount is intended to reflect the typical cost of treating similar patients.  . Subsidies for graduate medical education were designed to help pay for the cost of educating medical residents and create incentives for teaching hospitals to treat MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). beneficiaries.

In its March 2016 report to Congress, MedPACThe Medicare Payment Advisory Commission (MedPAC) is a nonpartisan legislative branch agency that provides the U.S. Congress with analysis and policy recommendation on the Medicare program. noted that most beneficiaries had no problem obtaining hospital services, in part because most hospitals have low occupancy rates. But large reductions in MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). hospital payments could lead to cuts in hospital staffing and closure of some hospitals, particularly those with low operating margins (e.g., rural hospitals, inner-city teaching hospitals, and public hospitals). Staffing cuts and closures would affect all patients who use these hospitals, not just MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). beneficiaries.

Under the Affordable Care Act, Congress has slowed MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). payments to hospitals. It has reduced PPSProviders receive a predetermined fee based on a patient’s diagnosis and other factors that affect providers’ costs, such as local wage levels. The amount is intended to reflect the typical cost of treating similar patients.  payment updates to account for expected gains in productivity and lower future “disproportionate share hospital” payments. The latter reflect lower uncompensated care costs due to expected gains in the number of insured patients.

As part of efforts to control MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). costs and improve quality and patient safety, The Centers for MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). & MedicaidA joint federal/state program that provides health care and LTSS. However, to qualify for Medicaid LTSS, people must have extremely low assets and income, or they have to “spend down” most of their assets. Services aims to reduce avoidable hospital readmissions. Hospitals with high readmission rates for certain conditions can now receive lowered reimbursement rates. In 2009, the all-cause 30-day hospital readmission rate for MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). patients was almost 19 percent. Many of these readmissions were avoidable. In fiscal year (FY) 2013, as an incentive to reduce readmissions and improve transitional care, MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). payments were cut by 1 percent for hospitals with high rates of avoidable readmission within 30 days for cases of heart attack, heart failure, and pneumonia. Cuts increased to 3 percent in FY 2015. Since 2013, additional conditions have been added to the list of avoidable readmissions, including hip and knee replacements, chronic lung disease, and coronary artery bypass graft surgery.

Hospital-specific readmission rates are published on MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). ’s Hospital Compare website (medicare.gov/hospital compare). From 2011 through the end of 2013, MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). hospital readmission rates dropped 1.5 percentage points, from 19 percent to 17.5 percent (representing a reduction of about 7.9 percent). This drop amounted to 150,000 fewer preventable readmissions, leading to MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). savings of $4.1 billion. Patients who visit the emergency room or receive observation services without being admitted are not categorized as discharged or readmitted for purposes of this initiative. They are both considered outpatient services. It is not clear whether hospitals are using observation services to reduce the number of readmissions that are potentially categorized as avoidable or whether this practice will compromise the quality of care.

TRADITIONAL MEDICARE PROVIDER PAYMENT—HOSPITALS: Policy

TRADITIONAL MEDICARE PROVIDER PAYMENT—HOSPITALS: Policy

Access to care

The MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). Payment Advisory Commission and the Centers for MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). & MedicaidA joint federal/state program that provides health care and LTSS. However, to qualify for Medicaid LTSS, people must have extremely low assets and income, or they have to “spend down” most of their assets. Services should continue researching how MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). payments to hospitals affect access to and quality of care in inpatient and outpatient settings. Particular attention should be given to rural areas. Appropriate strategies should be developed to address access issues. For example, the Centers for MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). & MedicaidA joint federal/state program that provides health care and LTSS. However, to qualify for Medicaid LTSS, people must have extremely low assets and income, or they have to “spend down” most of their assets. Services (CMS) should monitor whether hospital closings and the reductions in the number of beds due to MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). ’s fiscal policies adversely affect access to care.

The MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). Payment Advisory Commission, CMS, or both should continue to monitor the adequacy of MedicareMedicare is the federal health insurance program for people who are age 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease (ESRD), (permanent kidney failure requiring dialysis or a transplant). subsidies to hospitals that treat a disproportionate share of patients with low incomes.