Post-Acute Care Payment Models: Change is in the Air

The apparent demise of yet another attempt to repeal and replace the Affordable Care Act has left many healthcare stakeholders wondering about the future direction of health policy. Over the last few months, the Centers for Medicare & Medicaid Services (CMS) has given some important clues, many of particular interest to post-acute and long-term care providers.

One of the most telling clues is the recent release of a Request for Information (RFI) by CMS on a “New Direction for the CMS Innovation Center.” This RFI, on the heels of a proposed rule to cancel mandatory bundles, sends a clear signal about change in tone with respect to top-down mandates from Washington by asking for more innovation to come from the private sector and states. Of equal importance, however, the RFI clearly reaffirms CMS’ commitment to value-based payment.

The RFI asks for input on eight things in particular:

1. Increased participation in Advanced Alternative Payment Models (APMs)
2. Consumer-Directed Care & Market-Based Innovation Models
3. Physician Specialty Models
4. Prescription Drug Models
5. Medicare Advantage (MA) Innovation Models
6. State-Based and Local Innovation, including Medicaid-focused Models
7. Mental and Behavioral Health Models
8. Program Integrity

Post-acute providers should be very interested in several of the above categories, most especially:

• Increased Participation in APMs: CMS is seeking input on how they can increase participation in Advanced APMs to provide greater opportunities for providers, especially physicians, to participate in value-based payment models. They are also looking for input on how they can make it easier for Advanced APMs created by commercial or other payers to count for purposes of physician bonuses under the MACRA legislation.

• Medicare Advantage Innovation Models: CMS is seeking guidance on increased flexibilities that would be needed for health plans to provide supplemental benefits to reduce costs and improve quality.

• For State-based and Local Initiatives: CMS is looking for input on how they could step up efforts to work with states on multi-payer models, such as better integrating Medicare and Medicaid.

This is an opportunity for grass-roots providers and payers to provide input to CMS with new ideas and suggestions for improvement. Comments on the RFI will be received by CMS through November 20, 2017.  More information on how to submit comments on the RFI can be found on https://innovation.cms.gov/initiatives/direction/.

Another signal about future direction was provided earlier this summer when CMS released two important proposals to make significant refinements to the Skilled Nursing Facility (SNF) and Home Health Agency (HHA) Medicare fee-for-service payment systems. These proposals have created quite a stir and have several things in common, including seeking to:

• Reshape payment systems to be more driven by patient characteristics rather than service delivery, particularly with respect to reducing incentives to provide more therapy in order to drive revenue. In both the SNF and HHA proposals, counting therapy minutes/visits would be out, replaced by patient characteristics that CMS claims are predictive of costs.

• Incentivize shorter lengths of stay. The proposed SNF payment refinements incorporate a downward rate adjustment for two of five per diem components of the rates based on the patient’s length of stay, while the HHA proposal seeks to move payment to a 30-day episode of care (instead of the current 60-day episode).

There are issues with both payment proposals, to be sure. For Medicare-oriented SNFs, the changes will require a wholesale reworking of clinical and operational strategies, including a shift away from a focus on orthopedic patients towards more medically complex care, as well as a retooling of admission, discharge and patient assessment processes. Also, how the length of stay adjustment would adequately cope with changing patient condition over a spell of illness remains to be seen. For HHAs, the proposal seeks to remove close to a billion dollars of funding without express statutory authorization to do so, coming on top of years of payment cuts. Some of these issues will be easier to fix than others.

There are opportunities with these changes as well. A perhaps under-appreciated aspect of both payment proposals is that, with appropriate tweaks, they could be helpful in positioning SNFs and HHAs as value-driven providers by encouraging admission of more medically complex patients and by not driving particular modes or lengths of service delivery. One thing we have learned is that when referring health systems and payers are facing downside risk, they will be looking for low cost, high quality providers. Having fee-for-service payment systems appropriately pull providers in that direction is not entirely a bad thing.

Health Dimensions Group can help your organization prepare for these changes through financial modeling, strategic positioning, and operational performance improvement. For information about HDG’s services, check out healthdimensionsgroup.com/services/, send us an email at info@hdgi1.com, or call us at 763-537-5700.

Authored by:
Brian Ellsworth, MA, Director, Payment Transformation
Health Dimensions Group