MedPAC June 2017 Report Highlights

1. Implementing a Unified Payment System for Post-Acute Care

MedPAC has previously recommended developing and utilizing a unified post-acute care (“PAC”) prospective payment system (“PPS”) that spans the four main settings – skilled nursing facilities, home health agencies, inpatient rehabilitation facilities, and long-term care hospitals.  In its June 2017 report, MedPAC recommends implementing a unified PAC PPS, beginning in 2021. However, MedPAC does not believe it is likely that the Centers for Medicare and Medicaid Services (“CMS”) will propose a PAC PPS before 2024, assuming Congress has granted it authority to do so.

Currently, services provided in PAC settings are based on the location of service and not individual patient characteristics. Therefore, payment can differ depending on the venue of care. Because a PAC PPS would have varying effects on payments for stays and on providers, MedPAC recommends that implementation include a three-year transition combining current setting-specific payments with PAC PPS payments.

In addition, MedPAC cites that Medicare payments exceed providers’ costs by 14 percent across the PAC settings. Therefore, MedPAC also recommends that the aggregate PAC payments be reduced by five percent.  According to MedPAC, its recommendations with regard to the PAC PPS will shift payments from high-cost settings/providers to lower cost settings/providers.

2.  Redesigning the Merit-Based Incentive Payment System and Strengthening Advanced Alternative Payment Models

The Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”) repealed the sustainable growth rate (“SGR”) system and established two tracks for payments to clinicians—the Merit-Based Incentive Payment System (“MIPS”) and Advanced Alternative Payment Models (“APMs”).  Concerned with the direction of the MIPS program, MedPAC outlines an alternative model for MIPS.

The alternative model would include a quality withhold for all services under the Medicare Physician Fee Schedule (“PFS”). MedPAC’s alternative model would reduce payment rates by a set percentage but allow clinicians to recoup the withhold, depending on quality performance. The alternative model would utilize population-based outcome measures instead of the current MIPS measures. Outcome measures would be calculated from claims/surveys, reducing clinician reporting.

3.  Stand-Alone Emergency Departments

MedPAC identified the rapid growth of stand-alone emergency departments since 2010. Concerned with the lack of claims data specific to stand-alone emergency departments, MedPAC previously recommended that providers be required to add a modifier to claims for services provided at stand-alone emergency departments. In this report, MedPAC offers a number of considerations for policymakers from reducing payment rates for off-campus emergency departments to encouraging the development of stand-alone emergency departments in isolated rural areas.

4.  Provider Consolidation:  The Role of Medicare Policy

MedPAC discussed the level of provider consolidation (both hospital and physician) in the healthcare industry. Despite arguments in favor of industry consolidation, MedPAC cites sources stating there is weak evidence to support the argument that financial consolidation consistently leads to lower cost or higher quality.

Hospital consolidation has increased the gap between what hospitals receive from Medicare versus commercial insurers. According to MedPAC, commercial prices average about 50 percent higher than hospital costs and often more than 50 percent above Medicare prices. In response, MedPAC has previously recommended restraining Medicare prices and imposing site-neutral pricing. With site-neutral pricing, MedPAC believes providers would still make efforts to consolidate; however, such consolidation would not be driven by recognizing new facility fees.

MedPAC issues two main reports to Congress each year, published in March and June.  The Advis Group continuously monitors the latest healthcare policy developments and stands ready to assist providers in developing prospective strategies.

To speak with a consultant today, contact Advis at 708.478.7030 or info@advis.com.