The Medicare Payment Advisory Commission (MedPAC) held its March 2023 public meeting on March 2 - 3. During the meeting, MedPAC discussed reforming Medicare’s wage index systems and aligning fee-for-service payment rates across ambulatory settings. A summary of each is below.

Reforming Medicare's wage index systems
Medicare uses wage indexes to adjust Medicare base payment rates for geographic differences in labor costs in its prospective payment systems (PPS). MedPAC believes that Medicare’s PPS wage indexes are inaccurate and inequitable due to data source limitations related to the use of broad labor market areas, and the number of wage index exceptions that Congress and the Centers for Medicare and Medicaid Services (CMS) have added over time to the Inpatient PPS (IPPS) wage index.

Why it matters: MedPAC serves as a non-partisan legislative branch agency that provides Congress with analysis and policy advice related to the Medicare program. Additionally, by law, CMS calculates the wage index, which is used for all PPSs, by surveying the wages and wage-related costs of IPPS hospitals, so any change to the IPPS wage index methodology will impact the Hospital Outpatient Prospective Payment System (HOPPS).

MedPAC Chair’s recommendations: Congress should repeal the existing Medicare wage index statutes, including current exceptions, and require the Secretary of Health and Human Services to phase in new Medicare wage index systems for hospitals and other types of providers that:

1. Use an all-employer, occupation-level wage data with different occupation weights for the wage index of each type of provider (using data from the Bureau of Labor Statistics (BLS) and the U.S. Census Bureau);
   • Note: CMS proposed using BLS in the clinical labor pricing update for the 2022 Medicare Physician Fee Schedule, which described a more general category of physicist that is paid at a lower rate than a medical physicist. ASTRO secured a revision to this proposed policy that increased the medical physicist rate to a more appropriate level. ASTRO will continue to monitor how the BLS data source is used in any proposed wage index changes and advocate for the most accurate sources available to ensure radiation oncology practices are not disadvantaged.
2. Reflect local area differences in wages between and within metropolitan statistical areas and statewide rural areas; and
3. Smooth wage index differences across adjacent local areas by capping wage index cliffs between adjacent local areas.

These changes would either be phased in over time and/or include a stop-loss program.

State of play: Most of the Commission members were supportive of these recommendations, so ASTRO expects these to be in the June Report to Congress. Also note these recommendations are similar to the ones made in the June 2007 Report to Congress.

Aligning Fee-for-Service Rates Across Ambulatory Settings

Medicare payment rates often differ for the same service delivered in ambulatory settings (physician offices, ambulatory surgical centers (ASCs) and hospital outpatient departments (HOPDs)). MedPAC believes these payment variations encourage arrangements among providers that result in services shifting to the settings with the highest payment rates, thereby increasing total Medicare spending and beneficiary cost sharing. This is a subject that the Commission has been discussing for several years.

MedPAC Chair’s recommendation: Congress should more closely align payment rates across ambulatory settings for selected services that are safe to provide in all settings.

Why it matters: While site-neutral payments may appear logical, the concern is that the site deemed most appropriately paid will be the one that is paid the least — even if that amount is not actually appropriate. This issue was raised by one of the commissioners during the discussion. A commissioner also mentioned that a shift to site-neutral payments will negatively affect rural and government hospitals the most (-2.5% and -0.8% change to total Medicare revenue, respectively).

Which services will be aligned? MedPAC identified 66 ambulatory payment classifications (APCs) for which alignment would be appropriate; 57 APCs would align OPPS and ASC rates with PFS rates, and 9 APCs would align OPPS rates with ASC rates. The Commission did not discuss which APCs were on this list, but the same number of APCs recommended for site-neutral payment appeared in the June 2022 Report, and that list included seven APCs related to radiation oncology.

Importantly, however, the Chair’s recommendation does not mention specific services. It was noted that the onus would be on CMS to develop a methodology or screens to determine for which services payment should be aligned, including consideration of access to care and safety. But, while the recommendation is generic, certain services have already been flagged by MedPAC in prior reports.

Overall, most of the commissioners were in support of the Chair’s recommendation, so ASTRO also expects to see it in the June Report to Congress.