Implications of Medicare Payment Rise for Outpatient Care

by | Published on Sep 3, 2014 | Healthcare News

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When the Centers for Medicare and Medicaid Services (CMS) released prospective Medicare payment rules for 2015 recently, they proposed a 2% increase in outpatient visit reimbursements for hospitals and a 1.2% hike for ambulatory surgery centers (ASCs). As the outpatient visits are increasing, this rule is really a boon for healthcare providers, especially when they are struggling to maintain their revenue owing to the reimbursement reduction under the Affordable Care Act (ACA). CMS will consider the comments on the proposed payment rules until September 2 and the final regulations are expected to be released around November 1. Let’s see the implications of payment rise for outpatient care.

The proposal mainly aims at discouraging unnecessary admissions. According to the 2010 statistics provided by the Agency for Healthcare Research and Quality (AHRQ), around 1 in 10 of about 40 million hospitalizations in 2008 was avoidable. Those admissions were for diabetes, dehydration, and certain heart conditions and infections and if treated with appropriate outpatient care, hospitalizations for these conditions can be avoided. AHRQ also points out that Medicare cost for unnecessary admissions in 2006 was more than $20 billion. In order to minimize unnecessary hospital admissions and reduce healthcare cost, Medicare’s Hospital Readmission Reduction Program (HRRP) was introduced under ACA. Though this development reduced the hospital readmission rate to 18.5% in 2012 from 19% during 2007-2011, many hospitals saw heavy penalization with this rule and obviously a drop in their revenues.

Difficulties with Hospital Readmission Reduction Program

Under HRRP, the initial hospital inpatient admission allowed for Acute Myocardial Infarction (AMI), Congestive Heart Failure (CHF) or Pneumonia is known as index admission. If a hospital admits index patient for the same cause that led to index admission or a different cause within 30 days after discharging from the index admission, readmission penalty will be charged against that hospital with two exceptions – readmission for certain staged AMI procedures that may be planned during index admission, and readmission to the same hospital for the same conditions during the same day itself.

The rule completely revamped the way the hospitals see inpatient care. Following are the difficulties faced by the hospitals as per healthcare experts.

  • Since the entry point of most readmissions is Emergency Department (ED), hospitals need to ensure that the emergency room staff and physicians are well-equipped to identify whether the patients visiting ED for any cause that bear a reasonable probability within 30 days of discharge from the same hospital and the initial hospital admission, is for AMI, CHF, or pneumonia.
  • As per the American Hospital Association (AHA), there were large disparities in the control different hospitals have in influencing the readmission rates. A 2013 JAMA study revealed that large (40%), academic (44%) and safety net hospitals (44%) were more likely to be highly penalized under HRRP than small, non-academic and non-safety net hospitals. Also, some hospitals located in areas having fewer physicians and other community-based services are being penalized unfairly.
  • HRRP allows incentives for hospitals if they implement strategies that can reduce the number of costly and unnecessary readmissions. But many hospitals reported that they were finding difficulty in receiving incentives despite the readmission reduction strategies because when rating hospitals, Medicare also takes into consideration the extent of improvement of each hospital in the past two years in comparison with other hospitals apart from the score obtained for quality.

With the increase in payment for outpatient care, healthcare providers can compromise for the cuts in inpatient care services through the reimbursement from hospital outpatient care services and ambulatory care centers.

How Hospitals Can Benefit from Payment Rise

It is expected that the proposed rule in 2015 would affect more than 4,000 hospitals and pay them around 56.5 billion, up by $5.2 billion over 2014 payments. CMS also estimates the rule would impact 5,300 ambulatory care centers and they would receive nearly $4.1 billion in Medicare payments in 2015, up by $243 million from 2014 payments. However, if the hospitals really want to take advantage of this hike, they need to improve their outpatient services.

Under the proposal, the hospitals that do not meet some outpatient quality reporting requirements would face a 2% reduction in reimbursements. So, the hospitals should not only provide more outpatient services, but hospital managers must be able to manage those services like inpatient services. Shifting patients from inpatient to outpatient setting is not that easy as it requires some high-touch care in the form of case managers, registered nurses and home monitoring. Hospital leaders should establish policies and procedures that can improve the quality of outpatient care. Hospitals can benefit from the Medicare payment rise if they direct patients to quality outpatient services and devise policies to keep the total cost of care for each patient below the coverage amount provided by the insurer.

Once the patients are able to seek lower levels of care from hospital-owned ambulatory sites, they are more likely to remain in their network. With competition rising in the outpatient market, hospitals are facing several challenges such as non-hospital competitors and price-sensitive consumers. In order to overcome this and benefit from the Medicare payment rise, hospitals should educate their staffs about the proper management and design of ambulatory care practices. If they find difficulty in conducting the educational program, they should hire the right people with operational experience in ambulatory care.

In addition to all these, to ensure streamlined accounting and revenue, hospitals should make sure that their insurance billing procedures are managed by professionals and that the claims are filed within the deadline.

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