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Date ArticleType
1/17/2017 Payment/Reimbursement
MedPAC Finalizes Medicare Payment Reform Recommendation

On January 12, 2017, the Medicare Payment Advisory Commission (MedPAC) finalized its March 2017 Medicare payment report recommendations. MedPAC develops a payment report with recommendations on Medicare payment policy for Congress each year. Congress is not required to act upon any MedPAC recommendations nor is the Centers for Medicare and Medicaid Services (CMS).

During the Skilled Nursing Facility (SNF) prospective payment system (PPS) discussion, the MedPAC Commissioners voted unanimously in favor of a recommendation to eliminate federal fiscal year PPS updates for 2018 and 2019, as well as to revise the existing PPS. The final SNF PPS recommendation language states:

"The Congress should eliminate the market basket updates for 2018 and 2019 and direct the [Department of Health and Human Services] Secretary to revise the prospective payment system for skilled nursing facilities. In 2020, the Secretary should report to Congress on the impacts of the reformed prospective payment system and make additional adjustments to payments needed to more closely align payments and costs."

Total estimated reductions to the profession would range from $750 million to $2 billion in fiscal year (FY) 2018 and $5 to $10 billion over five years.

In departure from past years, MedPAC also unveiled a new March report section which summarizes its post-acute care (PAC) recommendations for all PAC provider types. Historically, MedPAC has presented each PAC provider type in separate chapters only. The new section summarizes the Commission's collective PAC recommendations over the years and points out the potential cumulative savings which could have been captured had their recommendations been adopted by Congress or CMS. In the staff presentation of the new "preamble" PAC section, the Commission highlighted SNFs as receiving Medicare payments above costs. The Commission also noted the need to adjust all PAC rates downward to ensure the base rates used for the unified cross PAC setting - mandated by the Improving Medicare Post-Acute Care Transformation (IMPACT) Act of 2014 - are not inappropriately inflated (see below). Other final PAC payment recommendations are presented in Table 1 below.

You can view the MedPAC payment system slides here
Finally, as part of the session on hospital and physician payment, MedPAC also finalized a recommendation that Congress should not provide an update to the hospice payment system during this discussion. Click here to view the corresponding slides. 
Unified, Cross-PAC Setting PPS

The Commission also began discussions on the June chapter focused upon the IMPACT Act-mandated PAC payment reform effort. In June 2016, MedPAC issued the first of three PAC payment reform reports statutorily-mandated by the IMPACT Act. The initial MedPAC report was intended to lay the foundation for more detailed work by the U.S. Department of Health and Human Services (DHHS) on the development of a unified PAC cross-setting payment system.  

In follow-up to the report, the DHHS is required respond to the June 2016 MedPAC document by 2020. A final proposal for a U-PAC payment system is due to Congress no later than 2023. Using this timetable, the earliest a PAC PPS proposal could be crafted is 2024.  

Of note, MedPAC's analysis indicates that the unified payment system could be implemented far sooner.  The IMPACT Act language envisions two years of unified PAC assessment tool data as part of the payment system development. MedPAC analysts believe the unified payment system could be implemented based solely on administrative data and subsequently modified when the unified assessment data becomes available. Design features of the June 2016 unified PAC system include:

• Common unit of service (e.g., stay of HHA episode)
• Common risk adjustment method
• Two payments for each stay (routine plus therapy, non-therapy ancillaries)
• Adjustment for home health episodes because home health is not based in "bricks and mortar"
• Short-stay and high-cost outlier policies
• Uniform application of payment adjusters

Click here to view the June 2016 chapter. During the January 12 discussion, MedPAC staff and Commissioners laid out next steps for implementation of the unified PAC PPS. These include the following considerations: 1) Transition timeline from separate PPS to a unified set of PAC PPS rates; 2) Level of aggregate payments relative to costs; and 3) Secretarial authority to make periodic refinements to the payment system. In terms of transition, MedPAC contemplates a three-year transition from separate PPS to the unified system. Commissioners debated the merits of including a transition period at all. Their discussion largely culminated in agreement that some transition period would be needed for political reasons - to make regulatory changes and to allow for provider adaptation. 

In terms of payment levels, MedPAC envisions roughly 30 patient groupings. Its analysis indicates that changes in providers' payments are generally inversely related to their current profitability; see slide 12 in the Unified PAC PPS deck . In terms of decision points, Commissioners discussed options for establishing levels of payment in terms of relative profitability and patient access. Finally, the Commissioners discussed the need for the DHHS to have the authority to rebase and make refinements to the payment system without legislation. 

As MedPAC provides more detail on the proposed payment system, AHCA/NCAL will promptly provide members with additional detail. For more information, please feel free to Mike Cheek at AHCA at mcheek@ahca.org.