MedPAC Considers 1% Payment Increase for Hospitals
On December 6, the Medicare Payment Advisory Commission (“MedPAC”) discussed draft recommendations calling for a 1% increase in inpatient and outpatient hospital payments in 2013. MedPAC, an independent body that advises Congress on Medicare payment policy, is scheduled to vote on the recommendations when they reconvene on January 17-18, 2013. During the comment period, most MedPAC members indicated their support for the recommendation.
The 1% increase would be less than the 1.8% hike Congress has scheduled for inpatient hospital payments for 2014 and a 2% hike schedule for outpatient payments. The inpatient hospital increase is scheduled to take effect on October 1, 2013. The outpatient payment increase starts on January 1, 2014.
The draft recommendation does not take into account automatic spending cuts of 2% for Medicare providers in 2013 that will go into effect as part of sequestration unless Congress takes action to avert them prior to January 1, 2013.
The MedPAC analysis estimated most hospitals continue to lose money on Medicare patients. According to the analysis, hospitals had a negative 5.8% Medicare margin in 2011 compared to a negative 4.7% margin in 2010. The analysis will be available on the MedPAC website within 3-5 business days.
Senate Finance Committee Urged to Extend Rural Hospital Provisions
On December 3, Senator Schumer (D-NY) and Senator Grassley (R-IA), along with 29 other Senators, wrote a letter to the Senate Finance Committee urging inclusion of legislation (S. 2620) that would extend the Medicare Dependent Hospital (“MDH”) and Low-Volume Hospital (“LVH”) programs for rural hospitals. Both MDH and LVH programs recently expired at the end of September 2012. The legislation would continue the programs until September 30, 2013.
The bipartisan letter asks the Senate Finance Committee to include the rural hospital access bill as part of the upcoming Medicare physician payment legislation. Many expect the Medicare physician payment legislation to be included in the year-end fiscal cliff deal. The letter stressed the assistance the MDH and LVH programs provide to rural hospitals that are facing an “array of financial difficulties and operational challenges under current Medicare Prospective Payment System.”
IRS Issues Final Rule on Medical Device Tax
On December 4, the IRS released a 58-page final rule explaining how medical device manufacturers will have to comply with a new 2.3% tax on medical device products starting in 2013. Generally, under the final rule, a “taxable medical device” is a device that is listed as a device with the FDA under section 510(j) of the Federal Food, Drug and Cosmetic Act, and 21 CFR part 807, pursuant to FDA requirements.
Of note to hospitals, the rule clarified that the device tax will not apply to custom kits that hospitals make to package devices that they plan to use in their own facilities for surgery or other procedures.
Unless Congress repeals or amends the rule, device manufacturers will be required to start making bi-monthly tax payments starting January 29, 2013. The first quarterly return for the device tax is due April 30 for the months of January-March 2013. The medical device industry is pushing Congress for a complete repeal of the rule. The lobbying effort is expected to continue in 2013 as the repeal could be included in a broader tax overhaul.
CMS Issues ICD-10 Reference Tool Despite Continuing AMA Pushback
CMS’s ICD-10 Project recently released a definitions manual and code reference tool available under “downloads” on the project website. The reference tool is intended for health providers to better understand the impact of the ICD-10 diagnosis and procedure codes on the MS-DRG system. Hospitals and other entities covered by the Health Insurance Portability and Accountability Act must convert to the ICD-10 coding system by October 1, 2014.
While CMS continues with ICD-10 implementation, the American Medical Association (“AMA”) is working with its members to sign on to a letter to CMS urging the administration to eliminate the implementation of ICD-10. The AMA letter expresses the group’s strong concerns about the costs and burdens of ICD-10 and questions whether there is any direct benefit to patients.
Legislation Introduced
H.R. 6626: Rep. Honda (D-CA) introduced the Health Care Innovation and Marketplace Technologies Act. The legislation would allow for a deduction for an amount equal to the amount paid or incurred by a health care provider for qualified health information technology placed in service by the provider during the taxable year. The deduction would be capped at $250,000 for a taxable year.
Next Week in Washington
The Senate reconvenes on Monday and the House on Tuesday, December 11 to a limited agenda. During the brief recess, leaders are expected to continue negotiations on the fiscal cliff, which remains the major issue in Congress. The health entitlement component of the deal remains mired in disagreements and tied to raising taxes. With only 25 days remaining before the cliff is reached, negotiations are expected to intensify in the coming week.
For more information, please contact John F. Williams, III at 317.977.1462 or jwilliams@wp.hallrender.com.
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