The Medicare Payment Advisory Commission (MedPAC) held a public meeting on January 12, 2012, where commissioners voted on recommendations for improving the skilled nursing facility (SNF) prospective payment system (PPS), as well as for the inpatient rehabilitation facility (IRF) and long-term care hospital (LTACH) payment systems.

As noted below, MedPAC made recommendations on revising and rebasing the SNF PPS and on rehospitalizations. Please keep in mind that MedPAC can only make recommendations to the Congress. The Medicare Payment Advisory Commission (MedPAC) is an independent Congressional agency established by the Balanced Budget Act of 1997 (P.L. 105-33) to advise the U.S. Congress on issues affecting the Medicare program. The Commission's statutory mandate is quite broad: In addition to advising the Congress on payments to private health plans participating in Medicare and providers in Medicare's traditional fee-for-service program, MedPAC is also tasked with analyzing access to care, quality of care, and other issues affecting Medicare.

Revising and rebasing the SNF PPS
MedPAC recommendations call for a revision and rebasing of the SNF PPS. The revision of the SNF PPS is to occur in FY 2013 and would include

1) the establishment of a separate non-therapy ancillary services (NTAS) component to the SNF PPS;
2) replacement of the current therapy component with one that establishes payments based on predicted patient care needs rather than service provision; and
3) adds an outlier policy to the SNF PPS (Congressional action required).

MedPAC staff reiterated the desire for a rebasing of the SNF PPS to better align SNF payments with costs and addressed a number of issues raised by the American Health Care Association (AHCA) against rebasing. These include recent and forthcoming reductions in rates, cross-subsidization of inadequate Medicaid rates, and impact on financial performance on some SNFs.

MedPAC noted that the recommended revision would correct known shortcomings of the SNF PPS and improve equity of payments across patients, and rebasing would raise payments for hospital-based, nonprofit, and SNFs that treat high shares of medically complex patients. The rebasing would occur in FY 2014 with an initial reduction of four percent, with a phasein of any additional reductions.

While a phasein and an initial reduction of four percent is an improvement over earlier MedPAC consideration of a rebasing without a phasein, AHCA nevertheless will continue to oppose rebasing.

Rehospitalization
MedPAC also recommended that SNF payment rates be adjusted for high rehospitalization rates. The rehospitalization recommendation is intentionally vague. It does not prescribe avoidable rehospitalizations, rather it refers to risk adjusted rates of rehospitalization. MedPAC staff made the point that SNF representatives had come in with a recommendation for an all cause approach and that there was indeed more than one way to do this.

Below are the recommendations and margin estimates and projections for the post-acute care sector. A transcript of the public meeting is available on the MedPAC website. In the coming days and weeks, AHCA will review and address the MedPAC recommendations.

Final MedPAC post-acute care (PAC) sector recommendations:

• Skilled nursing facilities (SNFs)
  • The Congress should eliminate the market basket update and direct the secretary to revise the prospective payment system for skilled nursing facilities in 2013. Rebasing should begin in 2014, with an initial reduction of four percent, and subsequent reductions over an appropriate transition period until Medicare’s payments are better aligned with providers’ costs.
  • The Congress should direct the secretary to reduce payments to skilled nursing facilities with relatively high risk-adjusted rehospitalization rates for their Medicare-covered skilled nursing facility stays.
• Inpatient rehabilitation facilities (IRFs)
  • The Congress should eliminate the update to the Medicare payment rates for inpatient rehabilitation facilities in FY 2013.
• Long-term acute care hospitals (LTACHs)
  • The secretary should eliminate the update to the payment rates for long-term care hospitals for FY 2013.
• Home health agencies (HHAs) (MedPAC will use last year’s recommendations. MedPAC did not vote on the same recommendations as last year)
  • The secretary, with the Office of Inspector General, should conduct medical review activities in counties that have aberrant home health utilization. The secretary should implement the new authorities to suspend payment and the enrollment of new providers if they indicate significant fraud.
  • The Congress should direct the secretary to begin a two-year rebasing of home health rates in 2013 and eliminate the market basket update for 2012.
  • The secretary should revise the home health case-mix system to rely on patient characteristics to set payment for therapy and nontherapy services and should no longer use the number of therapy visits as a payment factor.
  • The Congress should direct the secretary to establish a per episode co-pay for home health episodes that are not preceded by hospitalization or post-acute care use.

Estimated PAC Medicare Part A Margins in 2010:

Patti Cullen, CAE
952.851.2487
pcullen@careproviders.org