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Medicare Announces 2016 Payment Proposals

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July 14, 2015


Medicare’s proposed payment policies for physicians, hospital outpatient departments, and ambulatory surgery centers could bring about significant changes for calendar year 2016. Released recently by the Centers for Medicare & Medicaid Services, the proposals update payment rates, change payment categories, introduce new payment-for-performance strategies, and continue Medicare’s drive to link payment to improvement in quality and health outcomes.


Rates: Physician payment rates would be increased by 0.5%, the first increase since Congress repealed the Sustainable Growth Rate, or SGR, formula which had threated deep payment cuts for years. Payment rates proposed for hospital outpatient departments in 2016 would decline by -0.2% and, for Ambulatory Surgical Centers, would increase 1.1%.


Quality: Hospital outpatient departments and Ambulatory Surgical Centers will be subject to a two percentage point reduction in their annual payment updates for not adequately reporting their performance on quality measures. In the 2016 proposal, CMS is adjusting the quality measures for hospital outpatient care.  Many physician practices also face future payment adjustments of plus-or-minus two percent based on how well practices perform on a set of quality measures.


Payment Categories: Ambulatory Payment Classifications (APCs) for hospital outpatient care would undergo adjustments and updates under the 2016 proposal, resulting in fewer APCs overall. A number of ancillary and secondary services would be packaged with the primary services. For physicians, Medicare is proposing payment reductions in what it considers to be misvalued payment codes.


New Payment Models:  Medicare is seeking comment on the new merit-based incentive payment system, or MIPS, a new system that bases physician reimbursement on how well physicians perform on quality measures. This was instituted as a replacement for the SGR formula. Separately, Medicare announced a new policy of bundling payments for hip and knee replacements in which hospitals in 75 regional markets would be required to accept a flat fee for all costs and be accountable for both costs and quality from the time of the surgery to 90 days after discharge.


Both the physician and outpatient/ASC proposals will be finalized in November, 2015, and go into effect in January, 2016.


Comments on the physician fee schedule proposal are due by September 8. Click for CMS press release.


Comments on the outpatient and ASC proposal are due August 31. Click for CMS press release.

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