MedPAC recommends 2007 payment update

One system would lose $1.1 million in revenue

In the Medicare Payment Advisory Commission’s (MedPAC’s) March 2006 report, the commission recommends a 2007 update for hospitals of market basket minus half of the commission’s expectation for production growth for outpatient and inpatient services.1 The commission’s productivity factor is 0.9% for 2007 deliberations. It’s a 10-year average of the Bureau of Labor Statistics’ estimate of economywide productivity growth.

MedPAC is an independent federal body that advises Congress on issues affecting the Medicare program.

"If approved, the proposed FY07 rate reductions will impact Clarian in real dollars," said Dan Evans, CEO of Indianapolis-based Clarian Health Partners, which owns or is affiliated with 15 hospitals and health centers throughout Indiana and has more than 1.3 million outpatient visits annually.2

Evans testified at the House Ways and Means Committee’s Health Subcommittee hearing on testimony regarding the report’s recommendations. "From 2007 to 2009, we project that the reductions would cumulatively amount to $8.3 million in lost inpatient revenue and $1.1 million in lost outpatient revenue," he said.2

MedPAC recommended that these updates should be combined with a quality incentive payment policy for hospitals. The commission has said that a pay-for-performance program should:

  • reward providers based on improving care and exceeding certain benchmarks;
  • be funded by setting aside, initially, a small portion of payments;
  • distribute all payments that are set aside to providers achieving the quality criteria;
  • establish a process for continual evaluation of measures.3


  1. Medicare Payment Advisory Commission. Report to the Congress — Medicare Payment Policy. March 2006. Washington, DC. Accessed at
  2. Statement of Daniel F. Evans, President and Chief Executive Officer, Clarian Health Partners, Indianapolis. Testimony Before the Subcommittee on Health of the House Committee on Ways and Means. March 01, 2006. Accessed at:
  3. Medicare Payment Advisory Commission. Report to the Congress — Medicare Payment Policy. March 2005. Washington, DC. Accessed at