Geographic Adjustment in Medicare Payment Phase I: Improving Accuracy (2012) / Chapter Skim
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1 Introduction and Overview
1 Introduction and Overview
Pages 15-36
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From page 15... ...
Although Medicare is a national program, policy makers and researchers working to develop and implement its payment systems have long recognized that health care delivery is local and that payment amounts must be adjusted to reflect input price differences across geographic areas of the United States. The two geographic adjustments applied to Medicare payments for care provided by hospitals and practitioners are the hospital wage index (HWI)
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From page 16... ...
Critics of the existing geographic adjusters identify a number of questions and concerns. Among these are problems and inconsistencies with the definitions of payment areas and labor markets and the discreteness of the borders between them; concerns about the appropriateness of the source data for determining wages and other input prices prevailing in an area; questions about how and to what extent variations in the occupational mix used to provide care should be reflected in the hospital wage and physician practice expense adjustments; and the lack of transparency in the construction of indexes and the data used to compute them.
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The phase 2 report will consider such issues as policy adjustments that affect the level and distribution of the health care workforce in metropolitan and nonmetropolitan areas, and the effect of the adjustment factors on population health and quality of care, as well as additional considerations to promote geographic equity in Medicare payments and beneficiaries' access to high-quality care. The statement of task for the study was developed by the IOM and the Centers for Medicare and Medicaid Services (CMS)
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(E) of Title XVIII of the Social Security Act and used to ensure that Medicare payment fees and rates reflect differences in input costs across geographic areas.
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We need more general consensus on geographic Medicare adjustment factors. Jonathan Blum, Director, Centers for Medicare and Medicaid Services September 16, 2010 of the Medicare payment formula.
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Medicare Learning Network; MedPAC, 2010. Payment basics: Hospital acute inpatient services IME Indirect Medical Education payment system.
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The numerical value of the wage index for any given labor market is the ratio of the average hourly hospital wage in that area and the national average hourly hospital wage. The hourly wages used to construct the wage index include all salaries and benefits for acute care hospital staff, including contract staff for selected clinical and administrative positions.
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From page 22... ...
Because the MSAs serve as proxies for actual labor markets, they may not adequately or consistently define hospital labor markets. According to RTI analyses of CMS data for this study, almost 40 percent of all IPPS hospitals have been reclassified -- that is, they are paid according to a wage index other than the one that applies to the geographic area in which they are located (see Figure 1-3)
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From page 23... ...
. Medicare payments to physicians and certain other clinical practitioners, including nurse practitioners, physician assistants, and physical therapists, are set by the PFS, a CMS payment system used to pay for more than 7,000 distinct services (CMS, 2010d; MedPAC, 2008)
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Medicare Geographic Classification Review Board (MGCRB) reclassifications apply to hospitals that requested reclassification to another payment area from the MGCRB and have met the board's criteria (773 hospitals, or 22 percent)
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Although the PFS geographic adjustments are known collectively as the GAF, technically there are three independent adjusters called GPCIs. GPCIs are used to help standardize the differences in resource costs incurred across geographic areas when those costs are compared with the national average costs for the physician work, practice expense, and malpractice insurance components of the fee schedule (CMS, 2010d)
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A BBRE V IATI O NS: ACA A ordable Care Act HCPCS Healthcare Common PE Practice Expense RVU Relative Value Unit Procedural Coding GPCI Geographic Practice PLI Professional Liability System Cost Index Insurance SOURCE: Adapted from MedPAC, 2010. Payment basics: Physician services payment system.
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From page 27... ...
Extensive public comments on the proposed revisions to the PFS rules in 2010 (CMS, 2010d) revealed a variety of concerns among stakeholders about approaches to geographic adjustment and perceived shortcomings of the current payment system, including whether physician work should be considered to be operating in a national market or whether there is sufficient evidence that the market value of physician work varies by region or by metropolitan or nonmetropolitan locations.
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result in unwarranted and unduly low rural reimbursement rates. More cur rent, relevant, and accurate data sources exist and should be used by CMS to make geographic adjustments to Medicare payments, especially in the area of physician practice expense.
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A major source of disagreement between providers in metropolitan and nonmetropolitan areas is reflected in discussions about whether these geographic adjustments should also serve as a policy lever to help address perceived provider shortages, particularly in nonmetropolitan areas. These dynamics further complicate the ability to make changes in a contentious political environment with the distribution of hundreds of billions of dollars in annual Medicare payments at stake.
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From page 30... ...
As a condition of supporting the final bill, 30 House Democrats negotiated with HHS officials and White House staff to restore the IOM studies of geographic variation and address "geographic disparities" in Medicare payment. On March 20, 2010, HHS Secretary Kathleen Sebelius sent a letter to these members, who came to be known as the House Quality Care Coalition, with a commitment to commission the IOM to conduct the two geographic variation studies.
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From page 31... ...
The committee heard testimony from hospital administrators and clinical practitioners who believe that hospital cost reports or actual practice expense data are both more understandable and more transparent to the provider community and a more accurate reflection of their actual business costs than the proxy data sources currently proposed or in use. However, the committee generally concluded that independent data that reflect market input prices faced by providers are conceptually more appropriate than are data on costs paid by the providers, given that actual costs also reflect local business decisions or requirements that do not necessarily reflect input prices across labor markets.
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From page 32... ...
Geographic adjustment, where possible, should reflect area-wide input prices for labor faced by all employers operating in the same local market and should not be drawn exclusively from data on the prices paid by hospitals or health care practitioners. To improve accuracy and reflect market prices faced by providers, geographic adjustment should reflect the local labor markets in which providers operate and compete for employees.
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From page 33... ...
The committee heard testimony from practitioners and policy makers who view geographic adjustments in fee-for-service Medicare payment as a way to help address provider shortages and achieve other policy goals. Throughout their deliberations, committee members also recognized that even the most accurate geographic adjustment factors will not resolve all problems associated with the fee-for-service payment system as they relate to issues such as access to care, provider shortages, and provider mix.
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2010c. Medicare program: hospital inpatient prospective payment systems for acute care hospitals and the long term care hospital Prospective Payment System changes and FY2011 rates; provider agreements and supplier approvals; and hospital conditions of participation for rehabilitation and respiratory care services; Medicaid program: Accreditation for providers of inpatient psychiatric services; Final Rule.
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2010. Testimony to the IOM Committee on Geographic Adjustment Factors: Geographic dif ferences in Medicare payment to physicians -- GPCIs.
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