AHA opposes MedPAC recommendations to Congress on site-neutral policy

The Medicare Payment Advisory Commission today released its June report to Congress that recommended the adoption of additional site-neutral payment policies for certain outpatient services. The MedPAC recommendation, which was discussed as being budget-neutral, would redistribute $7.5 billion in Medicare spending for certain services performed in outpatient departments and ambulatory surgical centers. The impact would be most pronounced on rural hospitals, which would face Medicare cuts of 2.5%, reducing rural hospitals’ average total Medicare margin (already -17.8%) to an even more alarming -21%. As most of rural hospital revenue comes from government payers, of which Medicare comprises nearly half, such additional site-neutral cuts would lead to devastating financial hardship, even more closures and drastically impact the communities rural hospitals serve. Moreover, a current legislative proposal modeled after MedPAC’s recommendation but not budget-neutral would lead to a $180.6 billion cut to hospitals over 10 years.

In addition, MedPAC's June report includes recommendations related to Medicare Part B drugs, including a proposal to change the Average Sales Price plus 6% methodology. That is, MedPAC proposes that the add-on to the ASP be revised to be the lesser of: 6%; 3% plus $24; or $220 per drug per day. AHA believes the proposal would harm hospitals and is premature given that the Inflation Reduction Act’s impact on prices, reimbursement and access to Part B drugs is not fully understood at this time.