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AHA Questions Accuracy of Combined Post-Acute Care Payment System

A report commissioned by the AHA found that the proposed post-acute care payment system under Medicare relies on outdated data and an overly complex regression model.

Post-acute care payment system and Medicare reimbursement

Source: Thinkstock

By Jacqueline LaPointe

- CMS and the Office of the Assistant Secretary for Planning and Evaluation (ASPE) should address fundamental issues with the prototype of a combined Medicare post-acute care payment system, a recent Dobson DaVanzo & Associates report stated. The issues include outdated data, an overly complex regression model, and potential care access restrictions.

The American Hospital Association (AHA) commissioned the report to evaluate a proposed Medicare prospective payment system that would streamline four existing reimbursement systems for post-acute care providers: home health agencies (HH), skilled nursing facilities (SNF), inpatient rehabilitation facilities (IRF), and long-term care hospitals (LTCH).

The Medicare Payment Advisory Commission (MedPAC) designed the prototype after the Improving Post-Acute Care Transformation Act of 2014 mandated the development of a single Medicare reimbursement system for the provider types. The Medicare reimbursement system was to pay for post-acute care services based on a patient’s clinical characteristics, rather than the care setting and therapy used.

The combined post-acute care payment system aimed to alleviate concerns that Medicare reimbursed providers different rates for the portion of the post-acute care patient mix that is similar and treated in more than one post-acute care setting.

To create a new post-acute care Medicare reimbursement structure, CMS, ASPE, and MedPAC used cost information from the Post-Acute Care Payment Reform Demonstration (PAC-PRD), which was a program launched in 2005 to collect standardized information from the four post-acute care settings to create a patient assessment instrument. The organizations also used Medicare claims from 2008 and 2010 to create payment rates that were intended to reflect the current costs of post-acute care.

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

However, Dobson DaVanzo & Associates researchers questioned the system’s payment accuracy considering the dated data.

“Since the PAC-PRD era, PAC [post-acute care] costs have changed due to a host of statutory and regulatory changes, which include, but are not limited to, the calendar year 2014 through 2017 rebasing of the HH payment system, the introduction of LTCH site-neutral payment implementation in 2015, the implementation of revised coverage criteria for IRFs, and the implementation of APMs [alternative payment models] in many markets,” they wrote.

The data also represented a small fraction of post-acute care providers and does not accurately represent the current distribution of the providers, researchers continued.

The provider sample employed in the PAC-PRD accounted for just 0.4 percent of post-acute care providers and 0.1 percent of post-acute care stays across four care settings in 2013.

Researchers added that IRF and LTCH providers and stays were over-represented, whereas SNF and HH providers and stays were under-represented in the sample.

READ MORE: Preparing the Healthcare Revenue Cycle for Value-Based Care

“The sample representativeness is further weakened by the likelihood of selection bias, as provider participation in the PAC-PRD was voluntary,” the report stated. “These limitations make the generalizability of inferences made using the PAC-PRD data open to question, as they could negatively affect the resulting PPS [prospective payment system], the accuracy of its payments and future replication work.”

Additionally, researchers raised concerns about the proposed post-acute care payment system’s regression-based design.

They explained that the prototype’s regression model was not “administratively feasible” because of its complexity. The Medicare reimbursement model would use about 100 patient characteristic variables to determine provider payments.

Some of the variables needed to determine payments are also unlikely to be documented completely until after the post-acute care admission.

Consequently, providers may have trouble estimating their Medicare reimbursement rates and devising appropriate care plans prior to or within a brief period after admission.

READ MORE: Good Data, Better Value-Based Care Can Boost Population Health

“Predictability and reliability are two key factors in the construction of a PPS [prospective payment system], and providers face substantial risks when they are lacking,” wrote researchers.

Without payment accuracy, researchers explained that the prototype for a post-acute care payment system could limit patient access to care. The move away from a four-setting framework may result in upheaval for some providers, which could result in closures of post-acute care settings that cannot manage the transformation.

For example, the payment transformation may restrict patient access to care for specialized post-acute care services because of significant payment reductions. MedPAC estimated that the post-acute care payment system prototype would reduce Medicare reimbursement to LTCHs and IRFs by 25 percent and 12 percent, respectively.

Post-acute care providers in rural areas may also face access issues. The combined Medicare reimbursement structure for post-acute care providers may exacerbate healthcare organization closures because of payment reductions and provider instability.

In addition, alternative payment models may challenge patient access to care if the prototype is implemented. Alternative payment models, such as bundled payments, motivate providers to seek lower-cost post-acute care providers, resulting in substantial cost reductions post-discharge.

But the proposed post-acute e payment system rates counter current market trends that favor alternative payment models, researchers argued.

For instance, the prototype would increase SNF payments, while alternative payment models aim to pay SNFs less since they are more expensive, causing SNF payments to fall since providers are aiming for fewer days in the facility and fewer SNF stays overall as community-based care develops.

To remedy the fundamental issues with the proposed combined Medicare reimbursement system, researchers recommended the following:

• Use a transparent development process and include input from the provider community

• Ensure patient access to specialized post-acute care services not found in all post-acute care settings by analyzing payment accuracy for subsets of providers that primarily treat high-acuity patients and/or practice in rural areas

• Update cost data to improve payment accuracy

• Streamline the combined system and ensure payment predictability by grouping patients into clinical categories rather than using a 100-element regression model

• Assess legacy post-acute care regulations that may impact payment equity under a combined system, including the LTCH 25-Percent Rule and 25-day average length of stay requirement, IRF 60-Percent Rule and three-hour regulation, SNF three-day stay mandate, and HH homebound requirement

• Anticipate the impact of alternative payment models on the combined payment system

In light of the challenges and recommendations, the AHA also advised CMS and ASPE to “not to rely on it [the prototype] as they conduct their PAC PPS development process. Its limitations prevent confidence in its accuracy and reliability, and should rule out its use as a basis of a new PAC PPS payment model.”

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