PPRC: Part B budget needs to shrink
PPRC: Part B budget needs to shrink
Highlights of trustees’ recommendations
Medicare’s Part B budget has a girth problem, according to the Washington, DC-based Physician Payment Review Commission (PPRC). If this key advisory panel to Congress has its way, the new year will require a "financial lite" diet and belt-tightening by several notches.
Here are highlights of the PPRC’s payment-related, cost-cutting recommendations for FY 1997-98:
• Replace the current historic charge-based method for calculating practice expense payments with a resource-based approach. Phase in this change in the overall Resource-Based Relative Value Scale (RBRVS) formula over a three-year period.
• Establish payment targets by replacing the current Medicare Volume Performance Standard (MVPS) with a target tied to the gross domestic product (GDP). The MVPS sets the performance standard for physicians’ services using physicians’ historical trends in volume and intensity growth, plus a 4% across-the-board payment reduction. Replace this approach with a formula linked instead to the projected GDP growth, PPRC’s report recommends. It also suggests including an annual 1% to 2% increase to allow for advancements in medical capabilities.
• Adopt a single volume performance standard and update for all categories of physician services. Phase in this conversion over three years so this change and a revision to practice expense payments together won’t create large payment reductions in a single year.
• Establish payment limits by restricting the annual conversion factor for physician services to within 5% of the Medical Economic Index (MEI). This is a new feature, one comparable to the fail-safe budget mechanism proposed in the Balanced Budget Act of 1995.
• Revise the current Medicare capitation payment methodology so it is not linked to fee for service. Currently, the controversial adjusted average per capita cost (AAPCC), Medicare’s capitation payment, varies based on geographic location. In each Medicare- designated district, Medicare capitation is designed to pay 95% of what physicians would receive if they were providing care on a fee-for-service basis. Many federal officials argue that this benchmark is too high, and the PPRC says it shouldn’t be attached to fee for service at all, but instead to clinical factors.
• Link AAPCC payments to risk adjustment or clinical needs. This would be the magic bullet, no doubt, but PPRC only hints at how it could be done. Commissioners recommend "a more reliable estimate of expected patient care costs" via "risk adjustment," i.e., targeting at-risk groups so more money is available for the very ill and less for the healthy. This can be done by starting with analysis of patient encounter data and patient self-reported data, PPRC suggests.
• Hold provider-sponsored organizations (PSOs) to the same standards as other risk contractors. Many physician groups argue that PSOs deserve special status and/or exemptions in this area, but the PPRC disagrees.
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