Fees for service, short-term fixes

Mary Stevens, editor, CMIO

With D.C. lawmakers trying to out-thrift (or at least out-maneuver) each other on the fiscal budget, this might not be the best time to ask for more money if you’re employed by the people. But if you must, you should do so humbly.

In a request for a 1 percent rise in payments for hospitals and for physician fee schedule services, Medicare Payment Advisory Commission (MedPAC) stated: “We recognize that managing updates and relative payment rates alone will not solve a fundamental problem with current Medicare FFS [fee for service] payment systems—that providers are generally paid more when they deliver more services without regard to the quality or value of those additional services.” This realism was included in a report delivered to Congress earlier this week by Glenn M. Hackbarth, MedPAC chairman.

This same week also saw the return of a familiar spectre, the threat of Medicare service payment cuts. The Centers for Medicare & Medicaid Services (CMS) has estimated that Medicare physician payments will be cut by 29.5 percent in 2012 unless a long-term solution is adopted.

In a letter to MedPAC, Jonathan Blum, deputy administrator and director of the Center for Medicare, released the projected 2012 physician fee schedule conversion factor update, which CMS put at $23.94. Thanks to the last-minute Medicare and Medicaid Extenders Act of 2010 (MMEA, which included the ‘doc fix’ extension of physician payments), the effective conversion factor is $33.98 through the end of 2011.

These estimates would produce a drop in payments of close to 30 percent, a reduction postponed by the doc fix provision, but not for long. “The MMEA prevented a reduction for 2011. This short-term relief has been critical—but so too is a long-term solution,” Blum wrote on behalf of the CMS.

Data released this week by Standard & Poor’s (S&P) show the need for a longer-term solution, if more evidence is necessary. The S&P Healthcare Economic Composite Index indicates that the average cost of healthcare services covered by commercial insurance and Medicare increased by 6.29 percent during the 12 months that ended in January, up from 6.05 percent for the 12 months that ended in December 2010. Medicare claim costs for hospital and professional services rose at a slower rate of 3.4 percent for the same time frame, as measured by the S&P Healthcare Economic Medicare Index.

Blum’s and Hackbarth’s words regarding fee-for-service care and reimbursement still resonate. The question, on several levels, is “how much?”

If you have the answer to this question, let me know at mstevens@cmio.net

Mary Stevens
Editor of CMIO