Healthcare Revenue Cycle Management, ICD-10, Claims Reimbursement, Medicare, Medicaid

Policy & Regulation News

AHA Finds Flaws with the Patient-Driven Payment Model for SNFs

The industry group criticized the Patient Driven Payment Model reimbursement structure, as well as proposed Medicare reimbursement changes impacting other post-acute care facilities.

Patient Driven Payment Model, skilled nursing facilities,and post-acute care

Source: Thinkstock

By Jacqueline LaPointe

- CMS is in the process of redesigning Medicare reimbursement systems for post-acute care facilities, but the American Hospital Association (AHA) is taking issue with the federal agency’s latest attempt to tie skilled nursing facility (SNF) payments to patient conditions and needs rather than volume of services.

In April 2018, CMS proposed to implement the Patient Driven Payment Model (PDPM), which would reimburse SNFs based on components of a resident’s care, including physical therapy, occupational therapy, speech-language pathology, nursing, and non-therapy ancillary services.

Based on the services rendered, CMS would adjust the SNF per diem payments to account for varying costs throughout the stay.

While the AHA commended CMS for developing an alternative to the current case-mix Medicare reimbursement system for SNFs, the organization still had some reservations about PDPM implementation.

Specifically, the AHA expressed concerns with the proposed interim payment assessments that would be used to reclassify patients to a new per-diem rate if they undergo a qualifying change in clinical status after the required five-day assessment.

READ MORE: Post-Acute Care Network Key to Value-Based Purchasing Success

While the policy acknowledges changes in clinical status, the proposed interim payment assessments (IPAs) do not reset the variable per-diem payment schedule, the hospital group explained.

“CMS is proposing that following an IPA, the patient’s variable payment schedule would continue on the existing schedule with no recognition of the change in clinical status that triggered the IPA,” the group wrote. “This misalignment between a patient’s change in clinical status, as recorded on the IPA, and proposed variable payment policy could result in higher-cost IPA adjustments, such as the addition of a high-cost NTA [non-therapy ancillaries], being underpaid.”

The AHA also stressed that the PDPM places too much weight on the five-day assessment.

The current SNF Medicare reimbursement system requires frequent patient assessments. The PDPM would reduce that requirement to just a single assessment at the five-day mark of an SNF stay. That assessment would determine a patient’s classification and per-diem payment for the entire SNF stay unless an interim payment assessment emerges.

However, completing the five-day assessment may be challenging for busy SNF providers, the AHA stated.

READ MORE: The Difference Between Medicare and Medicaid Reimbursement

“Furthermore, such detailed coding often requires the results of specific lab and test results not performed by or readily available to SNFs at the point of admission. For example, hospitals often discharge patients to SNFs on Friday evenings when clinical professionals can be difficult to reach,” the group wrote.

Additionally, the hospital group urged CMS to reconsider the use of ICD-10 codes in the PDPM. SNFs have not had to use ICD-10-CM or ICD-10-PCS codes under other Medicare reimbursement models, and the time it’ll take to learn the extensive coding system and incorporate it into their may not be worth it.

“Based on these concerns, we urge CMS to identify an alternative to using ICD-10-CM and ICD-10-PCS codes for categorizing a resident into a PDPM clinical category, such as the ‘checklist approach’ under development by other SNF stakeholders,” the AHA advised.

The checklist alternative should include the following:

  • Detailed instructions to accompany the conditions and comorbidities listed on the checklist to help staff understand what conditions and procedures are included
  • A hierarchy for conditions that also covers overlapping components
  • Definitions of non-therapy ancillary conditions

READ MORE: MedPAC Targets Post-Acute Care for Healthcare Payment Reform

In addition to these concerns, the hospital group called on CMS to reconsider payments for non-therapy ancillaries performed on high-acuity patients, finalize periodic recalibrations of the model, provide transitional support, and address how the model links to alternative payment models.

Concerns with proposed changes to the IRF case-mix system

Skilled nursing facilities are not the only post-acute care facilities slated to see some Medicare reimbursement changes. CMS also proposed to modify the patient assessment process and case-mix system currently used by inpatient rehabilitation facilities (IRFs).

The AHA also expressed concerns with the proposed changes to the IRF payment system.

“We are concerned that these new policies rely on inaccurate data, underestimate patient severity and are otherwise not transparent – all of which could adversely impact patient access, quality, and safety,” the hospital group wrote. “The AHA recommends that, instead of finalizing its proposals, CMS should continue its development of a new system in collaboration with the field.”

The AHA specifically took issue with the potential use of quality indicators in lieu of the Functional Independence Measure (FIM) items and modifiers currently used in IRF patient assessments and payment setting processes.

CMS wants to rely more on quality indicators to reduce administrative burden and standardize data collection across all post-acute care facilities.

However, the AHA argued quality indicator data will be inaccurate because IRF providers have expressed confusion over how to report on this new data element. Quality indicators use different point scales, definitions, and data structures than FIM items.

“In addition to the challenges associated with switching to the different design, definitions and scales of the new indicators and the concurrent utilization of the two sets of metrics, the rollout of the new QIs was further inhibited by CMS’s release of implementation guidance in a piecemeal fashion, including periodic revisions to the IRF-PAI [patient assessment instrument] instruction manual and provider training, as recently as spring 2018,” the group continued.

Taken together, the AHA concluded that quality indicator data would face accuracy and validity issues, which warrants additional attention from CMS.

The challenges with quality indicator use also create issues with the new case-mix groups proposed by CMS, the AHA added.

“We are concerned that some of the Section GG quality indicators now being proposed for use in payment setting appear to inappropriately raise overall functional status, which would reduce the allocation of IRF resources,” the group wrote. “Specifically, analysis by Uniform Data System for Medical Rehabilitation’s (UDSMR) FY 2017 IRF discharges found that many of the new indicators show a higher rate of patients with maximum function (and, therefore, lower IRF needs).”

The AHA urged CMS to abandon its proposed case-mix group changes and analyze how switching from FIM items to quality indicators will impact patient needs and IRF payments.

AHA opposes budget neutrality adjustment for LTCHs

In another round of potential post-acute care payment changes, CMS recently proposed to permanently eliminate the “25% Rule,” which reduces Medicare reimbursement to long-term care hospitals (LTCHs) that exceed the referral threshold.

To offset the rule removal, CMS also proposed to apply a negative 0.9 percent budget neutrality adjustment to LTCHs.

The AHA opposed the budget neutrality adjustment in a recent letter to CMS, arguing that previous delays of the 25% Rule were not accompanied by a budget neutrality adjustment. Policymakers have been postponing the rule’s implementation since 2006.

The hospital group also contended that site-neutral payment policies for LTCHs make the budget neutrality adjustment unnecessary. CMS started site-neutral payments for LTCHs in 2015, resulting in decreasing LTCH case volumes and Medicare payments to the facilities.

The site-neutral payment policy reduced or is expected to reduce aggregate Medicare reimbursement to LTCHs by over $1.1 billion, according to an AHA analysis.

“Given the transformative impact of this $1.1 billion site-neutral payment cut on the LTCH field, finalization of the proposed 25% Rule BNA [budget neutrality adjustment] would be wholly unwarranted and excessive,” the group wrote.

CMS is on the path to transforming post-acute care payments to shift the industry away from fee-for-service payments. As the federal agency tests new methods for post-acute care payment, the AHA advised policymakers to consider their recommendations when finalizing new Medicare reimbursement policies. 


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