Making changes to the data sources and wage areas used to calculate Medicare geographic payment adjustments would improve payment accuracy but not significantly impact provider reimbursements, according to an Institute of Medicine (IOM) report released Tuesday, July 17.

The study also concluded that, other than increasing payment accuracy (such as changing the distribution of health care providers and increasing beneficiaries’ access to care), reforming geographic adjustments isn’t the right approach to achieving policy goals.

“The main criterion for those adjustments should be accuracy,” said Institute of Medicine (IOM) committee member and independent consultant Bruce Steinwald, at a July 17 briefing on the report. “The government should not try to achieve other policy goals through those adjustments.”

IOM committee members, researchers and consultants reached these conclusions based on a series of statistical simulations meant to judge the impact of implementing reforms designed to improve geographic payment adjustment accuracy.

Impact on Provider Payments and Implications for the Future

According to the simulations, 88 percent of Medicare discharges from hospitals and 96 percent of physician billings would change by an average of less than 5 percent in either direction.

“Five percent is typically considered a relatively modest change,” said committee member and Urban Institute senior fellow Stephen Zuckerman.

There also didn’t appear to be a significantly disproportionate impact on rural provider areas or those classified as health care shortage areas, Zuckerman said.

The study committee recommended the changes in data sources and market areas to make payment adjustments more accurate in its first report released in June 2011. The committee members concluded in the brief for their second report that enacting the changes laid out in their first report would improve payment accuracy and create a solid model and basis for future policy decisions.

IOM Committee Recommendations

There are still geographic areas where Medicare beneficiaries have limited access to care and might have trouble finding providers who accept Medicare. In order to remedy that, the committee suggested that the Medicare program develop policies to promote access to primary care services in these areas.

The committee also recommended that program administrators pay for services that improve access to care in underserved areas; another recommendation urged federal support for independent external evaluations of ongoing programs meant to improve access for underserved regions.

Telehealth services are a “promising strategy” for reaching out to more patients, according to the report brief. These services use information and communication technology to give providers the ability to serve patients remotely. Telehealth services could be used to manage care for beneficiaries with chronic medical conditions such as diabetes and arthritis.

“We certainly do recommend expanding the coverage for telehealth as we look to the future,” said Joanne Pohl, a committee member and former University of Michigan nursing professor, at the IOM briefing.

Additionally, the committee suggested that Medicare develop policies that would expand health care providers’ scope of practice to improve access to their services. Care roles are changing and legislative scope of practice regulations should change for providers such as nurse practitioners, according to the report brief.

Outside of the arena of improving access to care, the report concluded that Medicare should re-evaluate its policies concerning unique payment adjustments for specific types of facilities, such as critical access and low-volume hospitals.

Finally, in order to improve the amount of data available, the committee recommended that Congress fund an independent entity to research and make recommendations about workforce distribution, supply and scope of practice.

Phase I Report

The study’s first report—Geographic Adjustment in Medicare Payment: Phase I: Improving Accuracy—focused on the accuracy of measuring input prices in determining Medicare Hospital Insurance (Part A) and Medicare Medical Insurance (Part B) geographic payment adjustments; researchers also scrutinized the data sources that serve as the basis for Medicare’s hospital wage index (HWI) and the three geographic practice cost indexes (GPCIs) for other providers. The Inpatient Prospective Payment System and other IPPSs also use geographic adjustment factors (GAFs).

In its first report, the committee recommended that the Centers for Medicare & Medicaid Services (CMS) and Congress make changes to improve geographic payment adjustment accuracy that include relying on data from the U.S. Bureau of Labor Statistics rather than using hospitals’ cost reports. Making the geographic market regions uniform for the hospital and physician pay indexes would also increase accuracy, the committee members said.

Study Background

Medicare adjusts its fee-for-service payments to hospitals, doctors and other providers depending on their location to account for geographic variations in the cost of doing business (for example, differences in rent and wage levels). This system has long been a source of criticism and disagreement surrounding how the payments are calculated, the transparency of the process and the definitions of payment areas.

The Geographic Adjustment in Medicare Payment consensus study was meant to address these complaints and concerns. It originated with The Affordable Health Care for America Act, which the House of Representatives passed in November 2009. The bill never became law, but Congress and the Department of Health and Human Services (HHS) carried out its request for an IOM study analyzing the data sources and methods used to make geographic adjustments to Medicare provider payments.

The CMS sponsored the study through a contract with the IOM, and the institute selected a committee of experts to consider the accuracy of geographic payment adjustments and the impact that reforming adjustment methods would have on the health care workforce, as well as on access to and quality of care. The researchers and committee members began their work in August 2010 with the goal of producing two reports for HHS and Congress.

Consultants from RTI International and IHS Global Insight helped the committee members and IOM study staff with their analysis.

About the IOM:

The IOM is an independent, nonprofit organization that provides research and advice to decision makers and the public regarding various aspects of health care. It got its start in 1970 as an expansion of the National Academy of Sciences.

The National Academy of Sciences is in turn part of the National Academies, which also encompasses the National Academy of Engineering and the National Research Council. The National Academies do not receive direct federal funding, although many of their activities are mandated and funded by Congress and federal agencies.

MedicareNewsGroup.com (MNG) original articles and Medicare Matters news summaries can be reprinted or republished with credit to the Medicare NewsGroup. To use our content, simply copy and paste text from the MNG website. Use of our content is done in compliance with our Terms and Conditions but does not extend to material from other sources that are subject to their copyright.