Geographic Adjustment in Medicare Payment Phase II: Implications for Access, Quality, and Efficiency (2012) / Chapter Skim
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2 Payment Simulations
2 Payment Simulations
Pages 23-50
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From page 23... ...
By definition, implementation of a geographic adjustment results in redistribution of payments but not a change in aggregate payment. The changes recommended in the Phase I report were made to improve the technical accuracy of the price adjusters as measures of market-level variation in health care input prices.
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From page 24... ...
The combined payment effects as presented in this chapter thus represent the committee's best estimate of the inaccuracy present in the current hospital and physician payment system, whether due to data shortcomings, market misclassification, or potentially mistargeted policy adjustments. By removing the policy adjustments from the index computations, the committee is not recommending the elimination of policy adjustments in the payment systems, only that policy adjustments should not be implemented through the geographic price adjusters.
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From page 25... ...
· Recommendation 4-1: The committee recommends that wage indexes be adjusted by using formulas based on commuting patterns for health care workers who reside in a county located in one labor market but commute to work in a county located in another labor market. · Recommendation 4-2: The committee's recommendation (4-1)
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From page 26... ...
floors · Remove rural floors for metropolitan areas · Remove frontier floors NOTE: BLS = Bureau of Labor Statistics; CBSA = core-based statistical area; GPCI = geographic practice cost index; HWI = hospital wage index.
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From page 27... ...
4 The term BLS-based index refers to the construction of the HWI and the GPCIs using BLS Occupational Employment Statistics wage data. 5 Each wage index was first adjusted for budget neutrality such that total simulated payments remain equal to total estimated payments under current CMS policy.
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From page 28... ...
FIGURE 2-2 Distribution of payment effects of IOM committee recommendations on the hospital index. Figure 2-2.eps NOTE: BLS = Bureau of Labor Statistics; CMS = Centers for Medicare & Medicaid Services; IPPS = Inpatient Prospective Payment System.
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From page 29... ...
There are 29 states and 81 metropolitan labor markets where the state nonmetropolitan hospital index is higher than the computed metropolitan area index, and hospitals located in these 81 markets are assigned the higher nonmetropolitan index. Any overall increase in payments that results from assigning rural floors is offset by a budget neutrality factor applied to all wage index values.
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From page 30... ...
In the great majority of labor markets affected by the rural floors, however, the index under the committee's recommendations is much closer to the original (prefloor) CMS index.
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Table 2-3 summarizes payment effects for rural hospitals grouped by special payment status under the IPPS, with an entry for "other nonrural" hospitals added for reference. The three categories of special rural status are sole community hospitals (SCHs)
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$0.5 53 1.4% Section 505 outmigration adjustments $4.6 270 0.5% Frontier floors <$0.05 46 7.4% Metropolitan area rural floors $9.6 261 3.1% For comparison: no reclassifications or adjustments $73.2 2,180 1.0%* NOTE: CMS = Centers for Medicare & Medicaid Services; IOM = Institute of Medicine; IPPS = Inpatient Prospective Payment System; MGCRB = Medicare Geographic Classification Review Board.
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From page 33... ...
. · State "rural floors." By statute, wage index values for counties in a metropolitan area can not be lower than the wage index value computed for rural counties in their same state.
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From page 34... ...
Data graphed in the lower frame also include the effects of commuterbased smoothing based on cross-market commuting patterns. Both frames reflect payment estimates made with the continued use of the 25 percent physician work adjustment.9 Isolating the separate effects of the three types of committee recommendations is somewhat more complicated for physician payments than it is for hospital payments, because in order to separate market effects from others it is necessary to compute payments holding other factors the same except for the market redefinition.
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From page 35... ...
The MP-GPCI is derived from specialty-weighted averages of state-filed data on malpractice insurance premiums. The WK-GPCI is derived from BLS wage data on seven "proxy" profes sions (see the 2011 Institute of Medicine Phase I report entitled Geographic Adjustment in Medicare Payment: Phase I: Improving Accuracy for discussion of why proxy professions are used rather than wages for physicians)
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From page 36... ...
Differences are computed between payments under all IOM's recommendations and payments under IOM recommendations excluding the redefined markets FIGURE 23 Distribution of payment effects of IOM committee recommendations on the GPCIs. Figure 2-3.eps NOTE: CMS = Centers for Medicare & Medicaid Services; GPCI = geographic practice cost index; IOM = Institute of Medicine.
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From page 37... ...
and the market smoothing adjustments by themselves have a relatively modest impact.11 Committee recommendations for the GPCIs that are not related to redefined markets do not appear to have a systematic redistribution effect by rural or regional location. Looking at the distribution of payments due to all changes, the counties with the largest total estimated payment reductions (from 15 to 26 percent)
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From page 38... ...
In aggregate, physician payments to the remaining four frontier states under the committee's proposed GPCIs are also estimated to be 5 percent lower than payments under current policy. In Alaska, current policy sets the physician work GPCI at 1.5.
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Physician Payment Effects by Health Professional Shortage Areas (HPSAs) Primary care shortage areas are a key construct for the committee's deliberations in addressing its mandate to consider the impact of geographic payment adjusters on access to care.
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From page 40... ...
The estimated payment effects for this study are computed at a county level, but linking the variously defined shortage areas to counties is not a straightforward task. HRSA's Area Resource File provides a three-level county shortage area indicator, where counties are identified only as a "full" shortage county, a "partial" shortage county, or "not a shortage county."13 Many counties are identified as "partial," particularly in metropolitan areas, and linking the payment impact to this indicator did not provide a strong enough base to evaluate the impact of the committee's recommendations on actual shortage area populations.
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From page 41... ...
SOURCE: RTI analysis of CMS Bonus Area Files. TABLE 2-6 Combined Physician Payment Effects by Health Professional Shortage Area Status and Metropolitan Location Metropolitan Nonmetropolitan HPSA County Status, Percent Share Percent Share by Estimated Share of Difference Share of of Total Difference Share of of Total County Population in CMS in Part B Primary in Part B Primary Care Primary Care Bonus Areas Paymentsa Enrolleesb Care RVUsc Paymentsa Enrolleesb RVUsc Non HPSA: 0% +0.7% 0.365 0.384 2.8% 0.089 0.063 Partial HPSA: 20 percent +0.1% 0.369 0.437 3.0% 0.096 0.075 20 to 80 percent 0.8% 0.011 0.008 2.5% 0.010 0.005 80 to <100 percent 1.3% 0.012 0.005 3.0% 0.032 0.013 Full HPSA: 100% 1.4% 0.004 0.003 3.7% 0.012 0.006 All counties +0.4% 0.762 0.836 2.9% 0.238 0.164 NOTE: CMS = Centers for Medicare & Medicaid Services; HPSA = Health Professional Shortage Area; RVU = relative value unit.
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From page 42... ...
There are 16 counties where less than 20 percent of the population is estimated to live in primary care bonus areas, three of which are metropolitan. These 16 counties account for 95 percent of all RVUs billed in the state, and the estimated payment impact of the committee's recommendations ranges from 2.7 to 7.9 percent.
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From page 43... ...
NA indicates no RVUs for this county in CMS 2012 file. FIGURE 2-6 Sample state map identifying payment impact and HPSA status by county (North Dakota: Physician payment impact vs.
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From page 44... ...
The first two are individual counties with large negative or positive payment effects, and the third describes statewide effects in Minnesota. 17 Notably, most of the policy adjustments, such as the frontier floors, the work GPCI floor in Alaska, and the rural floor for the HWI are congressional mandates.
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From page 45... ...
These examples consider the degree to which these changes may be due to the rural floor distorting the accuracy of the HWI versus the switch from using hospital-reported occupationally adjusted wage data to BLS wage data. Finally, this section also gives examples of three of the largest adjustments that are made to the HWI as a result of applying the outmigration commuter smoothing method.
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From page 46... ...
This change resulted in the rural floor wage index being applied to 60 urban hospitals in the state of Massachusetts, increasing wage indexes for these hospitals from an average of 1.16 in FY 2011 to 1.35 in FY 2012.18 It is therefore not surprising that the isolated effect of removing the rural floor in Massachusetts would result in a 929 percent decrease in the HWI for urban hospitals across the state. For the majority of metropolitan areas in Massachusetts, the original occupationally adjusted HWIs that are based on wage data reported from hospitals only differ from the committee's recommended wage indexes using BLS data by a few percentage points compared to the 1929 percent difference between the pre- and postrural floor occupationally adjusted indexes.
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From page 47... ...
The effect of removing the rural floor is more dramatic in some states than others as a result of the differing degrees of inaccuracy that result from the current policy. In addition, the effect of applying the outmigration commuter smoothing adjustment is also larger in some counties than others.
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From page 48... ...
Key Findings from Hospital Payment Simulations 1.If the more technically accurate wage index were implemented, the change in payments would be between 5 and +5 percent for discharges in 88 percent of hospitals. 2.The most substantial differences in payments under the index as recommended by the committee as compared to payments under current CMS policy are the result of eliminat ing policy adjustments, such as the various exceptions, market reclassifications, and floors, rather than the result of technical corrections to improve accuracy.
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From page 49... ...
. Unlike in Alaska, where the large reduction in payments results from the committee's recommendation to remove the work GPCI floor, in Puerto Rico payment changes result from the committee's treatment of missing data.
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From page 50... ...
5.Because many rural areas are also HPSAs, physician payments under the committee's pro posed indexes are reduced in most of the rural primary care shortage areas that are currently eligible for Medicare primary bonus payments. Among medium, high, or full primary care shortage counties in rural areas, estimated payment changes range from a reduction of 26 percent to an increase of 1.7 percent.
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