2015 Medicare Reimbursement Analysis and Outlook
Hospitals, on average, will receive a 2.3% Medicare payment update and continue to be incentivized to readmissions, improve quality and outcomes, and reduce costs under the final annual hospital payment regulation released by CMS in August 2014. This market will likely see increasing penalties for high readmission and infection rates in future regulations. Ultimately, the expansion of healthcare coverage via the rollout of insurance exchanges and Medicaid expansion will have an impact on hospital finances and there will be an increased focus on bundling primary and ancillary services in the outpatient setting. Furthermore, the scrutiny of the quality of care at ASCs will increase.
With Republicans taking control of the Senate and strengthening their majority in the House, look for a focus on SGR reform and a major lobbying effort to repeal and replace the current payment formula. Capitol Hill must first deal with the expiration of the “patch” and then address how to move forward on a long-term solution.
Several pieces of legislation were passed in 2014 aimed at repealing and replacing the troubled payment system, and while none of them were passed into law, their existence positions SGR reform as a viable opportunity to move through Congress in 2015. Bills must be reintroduced in every new Congress, so look for several proposals to surface on how best to repeal and replace the embattled SGR. Any legislation which proposes to repeal the current SGR formula has a price tag of $128-$140 billion, according to the CBO. Given the desire to replace the SGR, physician Medicare reimbursement payments are likely to remain the same or slightly increase (.05%) over the next decade. Further impacts to this market can be found in the recent delay of Stage 2 Meaningful Use with regards to the EHR Incentive Program.
In 2014, Congress passed H.R.4302, the Protecting Access to Medicare Act of 2014 (PAMA). This bill makes the first significant changes to payment for lab tests since 1984. Starting in January of 2017, CMS will base Medicare payment rates for all tests on CLFS on rates for the same services from private payers. The law limits year-to-year reductions in payment rates to 10% a year from 2017 through 2019 and 15% from 2020 through 2022. As a result of sequestration, PAMA, and other existing cuts, clinical lab services will be cut up to 18.4% by 2017 and 23.2% by 2022. Furthermore, the diagnostic lab arena will likely continue to be a target for offsets and reduced payments. Initiatives such as bundling payments, instituting lab co-payments for Medicare recipients, possible further reductions in the lab fee schedule, and expansion of competitive bidding for lab services are all on the table.
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