Friday, March 4, 2016

MedPAC Discusses Development of a Unified PAC Payment System

Mike Cheek

On March 3, the Medicare Payment Advisory Commission (MedPAC) held its final public meeting to discuss components of a conceptual model for a unified cross-setting post-acute care (PAC) payment system. Commissioners raised no concerns, and the final report, due to the U.S. Department of Health and Human Services (DHHS), appears to be on track for an April 7-8 final Commission vote.

During the April discussion, the entire conceptual model will be voted on in whole, rather than by component. The final report then will be sent to DHHS in June 2016. The MedPAC report is the first of three PAC payment reform reports statutorily mandated by the Improving Medicare Post-Acute Care Transformation (IMPACT) Act of 2014. The initial MedPAC report is intended to lay the foundation for more detailed DHHS work on the development of a unified PAC, cross-setting payment system.

MedPAC staff noted the Commission has been critical of existing payment policies for certain PAC providers, including home health agencies and skilled nursing facilities. Further, MedPAC staff stated the Commission's analysis has found that a PAC PPS is feasible. During the session, MedPAC staff described design features of a unified payment system.

Discussion also centered on the following areas:
  • With respect to a high cost outlier policy, MedPAC staff stated the analysis indicates it would make little or no aggregate difference in payments for most stays, but would have an impact on medically complex stays. 
  • While low volume providers may need some protection, there is no evidence for the need of a rural or "frontier" adjuster or an adjustment for teaching inpatient rehabilitation facilities. 
  • Staff discussed the potential impact of a PPS on provider payments, indicating that aggregate payments exceeded costs by 19% in 2013. 
  • They further outlined a series of implementation issues, including that the DHHS should consider the level of payments relative to costs, a transition policy, earlier implementation of a PAC PPS using adjustment data, use of a larger high-cost outlier pool initially, and periodic refinements to keep payments aligned with costs. 
  • MedPAC also indicated Medicare should consider removing regulatory differences among settings and the creation of a common set of regulatory standards with additional requirements for specific populations. 
In conclusion, MedPAC staff noted that the Commission's work indicates that while a PPS is a good first step toward broader payment reforms, additional reforms such as episode-based payments would be needed to dampen undesirable FFS incentives. Commissioners lauded the report, suggesting inclusion of a recommendation to accelerate development and implementation of a unified PAC payment system.

The final report will be voted on in-whole at the April 7-8 meeting. AHCA/NCAL has drafted a meeting summary with more details, and you may view the MedPAC meeting slides here. As always, AHCA/NCAL staff will remain engaged with MedPAC on the development of the payment system and will keep members up-to-date on developments.

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