MedPAC Weighs Unified Payment System for Post-Acute Care

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By Mindy Yochelson

Nov. 6 — It's possible to design a “reasonably accurate” Medicare prospective payment system encompassing all facilities involved in post-acute care, staff members for the Medicare Payment Advisory Commission said Nov. 6.

A system with a common unit of service and the ability to adjust risk would pay claims based not on setting but on patient characteristics, with higher payments for sicker beneficiaries.

A unified system for long-term care hospitals, inpatient rehabilitation facilities (IRFs), skilled nursing facilities (SNFs) and home health agencies is “likely to change how and where PAC services are furnished,” Carol Carter, a MedPAC principal policy analyst, said.

Recommendations Mandated

The Improving Medicare Post-Acute Care Transformation Act of 2014, signed into law in October 2014, included requirements for MedPAC recommendations by June 2016 on a new prospective payment system (PPS.) The law also requires providers to submit standardized data to allow Medicare to compare quality across different post-acute care (PAC) settings.

Unlike under the current system for SNFs and home health agencies, providers wouldn't be able to get higher reimbursements by increasing the amount of rehabilitation they provide, MedPAC senior analyst Dana Kelley said.

Fee-for-Service Incentives

However, Carter said a new PPS shouldn't be the “end point” in transforming the PAC system.

Even if a joint PPS were installed, it would still be part of a fee-for-service (FFS) system that is behind financially motivated provider actions such as reducing costs by stinting on care, allowing multiple PAC stays that don't support care coordination, discharging beneficiaries too early and admitting those beneficiaries with marginal care needs, staff said.

Therefore, a new payment system should be considered a first step, staff said.

Commissioner Craig Samitt, a vice president at Anthem Inc., said the new system would “still be basing these reimbursements on a fee-for-service chassis when we could shift more to a bundle.”

Policy makers should consider “companion policies” that would “dampen FFS incentives” such as value-based purchasing that would tie a portion of payments to quality, staff said.

The Medicare agency could, for example, “tie a portion of payment to resource use over the course of an episode with a measure of Medicare spending per beneficiary,” Kelley said.

Third-Party Manager

Staff raised the possibility of hiring a third-party vendor to manage PAC services in a given area.

“Because the vendor would be at risk for care within the area for a defined period of time, it would have a financial incentive to encourage beneficiary to select the lowest cost appropriate setting,” Kelley said.

Commissioner Alice Coombs, a critical care specialist and an anesthesiologist in Weymouth, Mass., said it's better for patients to be in PAC in their geographic area. “I think the vendors would be very important” in working to ensure that patients are placed close to where they received treatment in order to improve care coordination, she said.

Common Requirements for PAC Settings

Over time, a common set of requirements could be developed in areas such as discharge planning, staff training and patient rights, MedPAC staff said.

In the near term, the commissioners could consider recommending the waiving of certain site-specific requirements, such as the rule that requires at least 60 percent of IRF admissions to be in one or more of 13 clinical conditions, staff said.

“In January, we will review our results of modeling all PAC stays in 2013 and estimates of the likely impact on payments,” Carter said.

To contact the reporter on this story: Mindy Yochelson in Washington at

To contact the editor responsible for this story: Brent Bierman at