Latest Post-Acute Payment Developments

Authored by Kristine A. Betz, MA, CPG, NHA
Consultant, Continuum Strategies

The March and April Medicare Payment Advisory Commission meetings updated providers on the latest post-acute payment developments. 

Site- Neutral Payments
In the March meeting, the Commission recommended equalizing payments across post-acute care (PAC) settings by means of site-neutral payments to skilled nursing facilities (SNFs) and inpatient rehabilitation facilities (IRFs) for select conditions.  The Commission indicates that, while services provided in SNFs and IRFs largely differ, there is considerable overlap in services for certain conditions.  These conditions include: hip and femur procedures, major joint replacement, and stroke.  These three conditions are of interest because they make up a sizeable share of IRF volume and spending, and they are frequently treated in SNFs.  In addition, these three conditions have been included in studies comparing IRF and SNF costs and outcomes, such as the Post-Acute Care Payment Reform Demonstration (January 2012).

Using 2011 MedPAR data, the Commission analyzed these three conditions to determine variances in payment between the two PAC settings.  Payments to SNFs and IRFs for hip and femur procedures were nearly identical.  However, payments to IRFs for stroke were 31 percent higher than payments to SNFs and payments to IRFs for major joint replacement were 40 percent higher than payments to SNFs.

In response to these payment variations, the Commission is exploring a policy that would base payments to IRFs on the payments made to SNFs for the selected conditions.  The Commission evaluated the financial impact of the proposed payment policy and the evaluation indicates:

• Payments to IRF for stroke would decrease by about 22 percent
• Payments to IRF for major joint replacement would decrease by about 23 percent
• Payments to IRF for hip and femur procedure would increase by about 5 percent

The estimated net savings utilizing SNF PPS policy in 2014 would be about $300 million.  The Commission plans to refine which conditions could quality for site-neutral payments.

A white paper titled “Analyzing Site-Neutral Payments in Post-Acute Settings” provides a comprehensive review.

Home Health Payment and Historical Trends
During the April meeting, the Commission provided an evaluation of the impact home health payment changes have had on access, quality, and supply.  The Commission examined the impact of payment changes from 2001 to 2012.  During this time period, the average episode payment has increased in all but three years (2003, 2011, and 2012).  Medicare margins have generally declined; however, despite these declines, agency margins have remained high.

Below are the Commission’s findings in respect to access, quality, and supply:

• The evaluation of supply indicates that the overall number of home health agencies has doubled from 2001 to 2012. This trend suggests changes in supply are not highly correlated with changes in the average episode payment. 
• The impact of rebasing on quality was examined using three measures:  hospitalization during the home health stay, and two functional measures that examine improvements in walking and improvements in transferring at discharge.  Rates of improvement (transferring and walking) increased in most years throughout this period, regardless of the direction of payment policy, with the exception of transferring rate for 2009.  In this year the rate declined slightly while average payments per episode increased 3 percent.  Overall, these trends suggest that changes in the functional rates of improvement were not highly correlated with changes in payment.
• The Commission analyzed access as a measure of utilization.  The aggregate utilization of fee-for-service home health care has grown rapidly.  The share of beneficiaries using home health has risen 50 percent and the episodes per user have increased 30 percent from 2001 to 2012.  While utilization per beneficiary increased from 2001 to 2010, it declined slightly in 2011 and 2012. However, the Commission attributes this decrease to factors unrelated to home health payment policy. 

The Commission concludes that payment changes and in particular, payment reductions, have had a negligible impact on access, quality, and supply of home health care services.  Historical data illustrates that agencies have been able to sustain high margins and effectively control costs.  Based on this analysis, the Commission contends that rebasing as set forth in The Final Rule: CY 2014 Home Health Prospective Payment System Rate Update will have a limited impact on access, quality, and supply.

A white paper titled “Impact of Home Health Payment Rebasing on Access, Quality, and Supply” provides a comprehensive review.

Kristine A. Betz has a master’s degree in gerontology and is a board-certified gerontologist and licensed nursing home administrator. As a consultant at Health Dimensions Group, Ms. Betz’s areas of emphasis include strategy development and market research. She has considerable experience in population health across a variety of senior care environments and expertise in conducting market and regulatory research and data analysis across the entire senior care continuum.