Monday, March 21, 2016

MedPAC Releases March 2016 Payment Policy Report

On March 15, 2016, the Medicare Payment Advisory Commission (MedPAC) released its annual March Report to Congress: Medicare Payment Policy. The report includes MedPAC's analyses of payment adequacy in fee-for-service (FFS) Medicare, as well as a review of the Medicare Advantage (MA) Plans and the Medicare prescription drug benefit. The fact sheet is available here.   

MedPAC makes payment system recommendations to Congress in this annual report, which may or may not be acted upon. The March 2016 report SNF recommendation language is identical to the December 2015 draft recommendation presented to the Commission and would essentially have the same impact on SNFs as past year recommendations. 

Report Summary
MedPAC reports that in 2014, the average Medicare margin was 12.5 percent. It notes, "[m]argins continued to vary greatly across facilities and reflect shortcomings in the SNF prospective payment system (PPS), the resulting favorable selection of rehabilitation patients (over medically complex patients), differences in costs per day, and cost control exhibited by some providers." In terms of non-Medicare margin (private pay and Medicaid), MedPAC points to a negative 1.5 percent margin in 2014 but points out this is a slight improvement over 2013.  

As discussed in its December 2015 meeting, MedPAC recommends that "Congress should eliminate the market basket update for 2017 and 2018 and direct the Secretary to revise the [PPS] for skilled nursing facilities. In 2019, the Secretary should report to the Congress on the effects of the reformed PPS and make any additional adjustments to payments needed to more closely align payments with costs." 

Our Response
AHCA/NCAL respects MedPAC's role in advising the Congress on Medicare payment policy but disagrees with MedPAC's payment recommendation. We believe that the Commission's margin methodology should be modernized to account for the decrease of Medicare and Medicaid FFS bed days and the increasing number of days attributed to managed care and alternative payment methods. Because it has not accounted for the declining number of FFS days, AHCA/NCAL believes the Medicare margin and related profit margin data points are overstated.  

While MedPAC's margin analysis includes "non-Medicare" payers (e.g., commercial payers and Medicaid), the Commission does not account for the decreasing proportion of overall revenue attributed to Medicare and Medicaid FFS. 

1.      MedPAC only notes a growing number of Medicare beneficiaries enrolled in MA plans, which in general pay less than Medicare FFS rates. The Commission draws conclusions on MA rates from a handful of publicly traded companies, which is not representative of the skilled nursing sector. It does not account for Bundled Payment for Care Improvement demos, reduced payments tied to difficult to secure quality-related payments from Accountable Care Organizations, or the potential impacts of Comprehensive Care for Joint Replacement demonstration sites.
2.      MedPAC indicates that Medicaid rates present less of a shortfall than in past. Again, MedPAC bases this analysis on Medicaid FFS data and does not account for the rapid expansion of Medicaid managed care for long term care. In 2016, CMS-commissioned research indicates that 31 states will have - or will be implementing - Medicaid managed care, which will include nursing center care. In most Medicaid managed care arrangements, providers are paid less their Medicaid FFS rates.  

AHCA/NCAL will be communicating ideas to MedPAC for modernizing its approach to accounting for the decline in the proportion of FFS payments and increasing numbers of days covered by managed care and alterative payment methodologies. If you have questions, suggestions or concerns, please feel free to contact Mike Cheek.

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