MedPAC June 2018 Report Focuses on Emergency Department Access and Use

June 21, 2018

McDermott+Consulting

On June 15, 2018, the Medicare Payment Advisory Commission (MedPAC) issued its June 2018 Report to the Congress: Medicare and the Health Care Delivery System. As part of this report, MedPAC considered using payment to ensure appropriate access to and use of hospital emergency departments (EDs), and recommended two changes to Medicare payment for ED services. This report adds to Congress’ growing scrutiny of how current hospital payment policies affect access to care for rural communities, as well as the proliferation of off-campus EDs in urban areas.

In its June 2018 Report to Congress, MedPAC highlights the challenges of rural hospital closures and the proliferation of off-campus EDs (OCEDs) in urban areas. To address these issues, MedPAC recommends two payment changes to ensure appropriate access to and use of hospital ED services:

  • Establishing a new, voluntary, outpatient-only hospital option for hospitals in isolated rural communities
  • Reducing Medicare’s payments to certain OCEDs in urban areas

Outpatient-Only Option for Rural Communities
In its report, MedPAC highlights the challenges facing rural communities, where a single hospital may be the sole source of care. Recently, hospitals in certain rural areas have seen the number of inpatient cases fall significantly, which has led to an increased closure rate for rural hospitals over the last three years. MedPAC recognizes that Medicare payment policy may be contributing to this closure problem, because Medicare pays a facility for emergency services only if the hospital also maintains inpatient services. This presents financial challenges and potential access issues for many isolated rural communities.

To address this problem, MedPAC recommends a new payment model that would allow Medicare to pay for emergency services at stand-alone EDs in isolated rural areas (more than 35 miles from another ED), even if these facilities do not provide inpatient services. Under this option, an ED would be required to be open 24 hours a day, seven days a week, but would not have to provide acute inpatient care. The facility could retain other services, such as ambulance and outpatient services. Isolated rural full-service hospitals that chose to convert to outpatient-only hospitals would receive the same standard prospective payment rates for ED visits as a full-service hospital. MedPAC further recommends a set annual payment (common across all outpatient-only hospitals) to help cover the facility’s fixed costs.

This proposal represents a significant change in Medicare payment policy, as Medicare does not currently pay for services furnished by stand-alone EDs. The payment policy change would also likely require the creation of a new Medicare provider type to make payments to the new stand-alone EDs.

Reducing Payments to OCEDs in Urban Areas
MedPAC simultaneously expressed concern about the recent increase in OCEDs in urban areas and the financial impact this growth has on the Medicare program. MedPAC expressed concern about perceived excessive expansion in the number of EDs, which could result in a shift of care from lower cost urgent care centers and physician offices to higher cost EDs.

Medicare currently has two levels of payments for provider-based OCEDs. One is for EDs open 24 hours a day, seven days a week (Type A payment rates). The other is for EDs open fewer than 24 hours a day or seven days a week (Type B payment rates). Type B ED rates are lower under the rationale that these facilities have lower standby costs. MedPAC, using evidence gathered on three states, found that Type B payment rates are approximately 30 percent lower than Type A rates.

Based on these findings, MedPAC recommends that Medicare reduce payments for certain urban OCEDs to rates equal to the Type A payment reduced by 30 percent (roughly aligning with Type B rates). The Commission suggests making an exception for OCEDs located relatively far (more than six miles) from on-campus EDs, because MedPAC believes these OCEDs likely provide unique access to ED services for their local community.

Congressional Focus
Congress also has recently increased its attention to policies affecting access to care in rural communities.

The Senate Finance Committee recently held a hearing highlighting issues unique to rural providers, including how to maintain access to high-quality health care with limited resources and changing populations. This hearing is expected to be the first in an ongoing series by the Committee.
Additionally, two bills would create new rural hospital designations and payment structures.

In the House, Representatives Lynn Jenkins (R-KS), Ron Kind (D-WI) and Terri Sewell (D-AL) recently introduced legislation that would establish a “rural emergency medical center” (REMC) designation under the Medicare program (Rural Emergency Medical Center Act, H.R. 5678). The REMC designation would allow critical access hospitals (CAHs) and prospective payment system hospitals with 50 or fewer beds to convert to a 24/7 ED and receive enhanced reimbursement rates. REMCs would provide 24/7 emergency care and other outpatient services that a hospital provides on an outpatient basis to Medicare beneficiaries (e.g., observation, diagnostic and telehealth services), and could provide post-acute care in a separately licensed skilled nursing facility unit. REMCs would be required to provide transportation to an inpatient hospital, if necessary.

In the Senate, Senators Chuck Grassley (R-IA), Amy Klobuchar (D-MN) and Cory Gardner (R-CO) introduced legislation that would create a new “Rural Emergency Hospital” classification under the Medicare program (Rural Emergency Acute Care Hospital, or REACH, Act, S. 1130). These hospitals would not have inpatient beds, but would have an emergency room and outpatient services along with certain protocols for timely transfer of patients who require more intensive care or inpatient admission. CAHs and rural hospitals with 50 or fewer beds as of December 31, 2014, would be eligible for the new designation. The legislation includes a Medicare payment rate of 110 percent of reasonable costs for services furnished at a Rural Emergency Hospital (both emergency care and outpatient services).

Conclusion
MedPAC’s proposed policy changes are not binding and require action from Congress to move forward to implementation. However, Congress tends to respect and pursue MedPAC recommendations. Congress has already shown its interest in this issue through recent legislation and hearings, as well as recently enacted legislation (Section 603 of the Bipartisan Budget Act of 215) that reduced Medicare payments for certain off-campus outpatient services. Therefore, hospitals in rural communities and urban hospitals with OCEDs should evaluate the implications and opportunities if policies of these types advance in the near future.

For more information please contact Emily Cook, Rachel Stauffer, or Eric Zimmerman.

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