AHA Urges Rural, Post-Acute Care Medicare Reimbursement Reform

May 24, 2017 - In a Congressional hearing on the current status of Medicare reimbursement systems, the American Hospital Association (AHA) urged lawmakers to focus on rural hospital and post-acute care payments.

MACRA extended a number of key Medicare reimbursement policies to financially support healthcare organizations, such as the Medicare-Dependent Hospital Program for rural hospitals and 25-Percent Rule relief for long-term care hospitals.

However, many of the payment provisions contained in the 2015 act are set to expire this year.

In response, the AHA highlighted how rural hospitals and post-acute care facilities would be particularly affected by the expiration of payment provisions. Therefore, lawmakers should continue or improve Medicare reimbursement policies that boost financial stability for these provider organizations.

Rural providers need permanent payment protections and ambulance add-on reimbursements

The AHA backed several pieces of legislation currently on the table that would make low-volume adjustments, the Medicare-Dependent Hospital Program, and ambulance add-on payments permanent.

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First, the industry group expressed support for the Rural Hospital Access Act of 2017, which targets low-volume adjustments and the Medicare-Dependent Hospital Program.

The bill introduced in the Senate in April 2017 would adopt MACRA’s low-volume hospital definition as an organization that is more than 15 road miles (instead of 35 miles) from another comparable hospital and has up to 1,600 Medicare discharges (rather than 800 total discharges).

Qualifying rural hospitals would receive an add-on payment between 25 percent for hospitals with 200 Medicare discharges or fewer to no adjustment for hospitals exceeding the 1,600 Medicare discharge requirement.

The AHA noted that the previous low-volume hospital definition from 2011 was so narrow that only two to three hospitals qualified each year. However, MACRA’s definition expanded the number of qualifying rural hospitals to about 500.

“This improved low-volume adjustment better accounts for the relationship between cost and volume and helps level the playing field for low-volume providers and also sustains and improves access to care in rural areas,” the industry group wrote. “If it were to expire, these providers would once again be put at a disadvantage and have severe challenges serving their communities.”

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The Rural Hospital Access Act of 2017 would also permanently establish the Medicare-Dependent Hospital Program, which MACRA extended until Oct. 1, 2017.

The program intends to reduce the financial risk small rural hospitals face when treating more Medicare patients than their urban counterparts.  Rural hospitals tend to depend more on Medicare revenue to stay open because rural residents, on average, are older, have lower incomes, and suffer from one or more chronic conditions.

Depending on Medicare revenue can make rural hospitals “more financially vulnerable to prospective payment,” the AHA stated.

Therefore, the Medicare-Dependent Hospital Program reimburses qualifying rural hospitals for inpatient services at the sum of their prospective payment system rate and three-quarters of the amount by which their discharge costs exceed the rate.

Second, the AHA urged lawmakers to pass the Medicare Ambulance Access, Fraud Prevention and Reform Act of 2017. The Senate bill from April 2017 would establish a permanent Medicare reimbursement increase for rural ground ambulance services.

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MACRA boosted rural ground ambulance reimbursement by 3 percent to provide financial stability to ambulance providers facing small patient volumes and long distances. It also created a special rural payment for counties that were in the lowest 25 percent in terms of population density.

But the ambulance add-on payment is set to expire by the end of 2017.

The AHA supported the permanent Medicare reimbursement boost and asked HHS to analyze how ambulance add-on payments should be changed to account for the healthcare costs stemming from ambulance services in urban, rural, and super-rural areas.

AHA voices concern with Medicare reimbursement changes for post-acute care facilities

The AHA cautioned Congress members about implementing proposed post-acute care reimbursement modifications, such as a unified Medicare reimbursement system and value-based purchasing program.

The Improving Medicare Post-Acute Care Transformation (IMPACT) Act of 2014 mandated CMS to develop a common Medicare reimbursement system for the four post-acute care provider types: home health agencies (HHAs), skilled nursing facilities (SNFs), inpatient rehabilitation facilities (IRFs), and long-term care hospitals (LTCHs).

The Medicare Payment Advisory Commission (MedPAC) developed a prototype in June 2016 and advised lawmakers to truncate the implementation process by over four years.

“While we appreciate the thoughtful work MedPAC has completed thus far on PAC PPS [post-acute care prospective payment system] development, it remains unclear how policymakers could eliminate four to five years from the IMPACT Act’s timeline to build a PAC PPS and still produce an accurate and reliable payment system,” the AHA wrote.

The industry group also expressed doubts about the proposed post-acute care value-based purchasing program.

“In concept, the AHA agrees with the potential for pay-for-performance to accelerate improvements in post-acute care,” the group stated. “However, we urged a number of improvements to the PAC VBP [post-acute care value-based purchasing] legislation due to concerns the bill too narrowly focuses on reducing provider payment rather than promoting ‘value’ – that is, the delivery of consistently high-quality care at a lower cost.”

To ensure the post-acute care value-based purchasing program truly promotes value, the industry group urged Congress to make the program budget-neutral within each post-acute care setting.

The proposed program is currently budget-neutral across all settings, meaning individual providers can earn back a portion or all the withheld funds. However, the AHA argued that this would “pit PAC providers against each other, when the bill purports to drive collaboration across setting types.”

The value-based purchasing program should also avoid comparisons between post-acute care settings. Since the facilities are significantly different, the original proposal’s concept of ranking of all providers against each other would be inappropriate.

Additionally, the AHA called for permanent long-term care hospital relief from the 25-Percent Rule.

The rule limits patient referrals from a host hospital to 25 percent. Long-term care hospitals exceeding the threshold would receive lower Medicare reimbursement rates for those admissions.

MACRA provided the post-acute care facilities with relief from the 25-Percent Rule until Sept. 30, 2017. The AHA endorsed a recent proposal to extend the relief for another year but encouraged CMS to rescind the rule altogether.

The industry group argued that site-neutral payments for long-term care hospitals implemented in 2015 diminished the need for the 25-Percent Rule.

“We look forward to working with the Committee this year on legislation to accomplish these goals and urge Congress and the Administration to act on legislation in a timely manner to provide certainty for patients and the hospitals who treat them,” the group concluded.