MedPAC Moves Toward Recommending Site-Neutral Payments for Rehab Services

The independent agency that advises Congress on Medicare payment issues is likely to recommend that Congress require Medicare to implement site-neutral payments for some rehabilitation services.

During last week’s meeting of the Medicare Payment Advisory Commission (MedPAC), members received a briefing from their staff that compared the costs and efficacy of treatment for conditions currently treated at both inpatient rehabilitation hospitals and skilled nursing facilities.  Based on this presentation, MedPAC is leaning toward recommending to Congress that research be undertaken to identify specific medical conditions that can be treated effectively at either type facility and then make Medicare payments for those services site-neutral – that is, the same payment regardless of which facility is providing the care (which generally means the lower, skilled nursing facility rate).

new medpacMedPAC members are expected to vote on this recommendation at their January 2015 meeting.

The National Association of Urban Hospitals (NAUH) opposes site-neutral Medicare payments.

See the presentation on site-neutral payments for selected Medicare rehabilitation services here, on MedPAC’s web site.

MedPAC Meets, Addresses Hospital Issues

new medpacThe independent federal agency that advises Congress on Medicare payment issues met last week in Washington and addressed a number of issues of importance to hospitals.

Among the issues discussed by the Medicare Payment Advisory Commission (MedPAC) were:

  • beneficiary access to hospital care and how service volume affects hospital costs
  • hospital short stay policy issues
  • per beneficiary payment for primary care
  • the 340B drug pricing program
  • site-neutral payments for selected conditions treated in inpatient rehabilitation facilities and skilled nursing homes
  • payment policies to promote the use of services based on clinical evidence

Find links to the presentations offered by MedPAC staff on these issues here, on MedPAC’s web site.

Medicare Announces Readmissions Penalties

Medicare will impose financial penalties in FY 2015 on the majority of U.S. hospitals for excessive patient readmissions.

In all, 2610 hospitals face penalties that range from one one-hundredth of one percent to three percent of all Medicare payments.  Last year, the maximum penalty was two percent.

iStock_000001497717XSmallThe majority of hospitals in 29 states will be penalized and 39 hospitals face the maximum penalty of three percent.  Overall, the penalties will amount to $428 million.  Many hospitals will be penalized even though they reduced their readmissions in the past year.

Medicare’s hospital readmissions reduction program was mandated by the Affordable Care Act in the belief that penalizing hospitals for what were considered avoidable readmissions would spur them to take steps to prevent such readmissions.  Readmissions cost Medicare $26 billion a year, of which $17 billion is considered unavoidable.

Concerns have been raised that the readmissions penalties are unfair to safety-net hospitals because they serve more low-income patients with more complex medical problems and who, after discharge, face financial and logistical challenges during their recovery that make them more likely to require readmission.  The National Association of Urban Hospitals has long been concerned about this bias and has supported legislation to add a risk-adjustment component to this program.

For a closer look at FY 2015’s readmissions penalties, including links to a file that lists individual hospital penalties nation-wide, see this Kaiser Health News report.

MedPAC Looks at Short Hospital Stays

At its public meeting last week, the Medicare Payment Advisory Commission (MedPAC) looked at challenges surrounding payments to providers for short hospital stays.
new medpacA presentation delivered by MedPAC’s staff looked at the profitability and growing frequency of one-night admissions; the impact of Recovery Audit Contractor (RAC audit) activities; Medicare beneficiary financial liabilities associated with observation stays; the controversial two-midnight rule; and possible ways to address these continuing problems.

MedPAC did not offer any formal recommendations during the meeting.

When the Centers for Medicare & Medicaid Services (CMS) proposed this year’s Medicare inpatient prospective payment system regulation in May, it invited interested parties to offer suggestions on how to address the short-stay issue.  In a letter that addressed a wide range of subjects, the National Association of Urban Hospitals (NAUH) offered the following recommendations on Medicare hospital short stay payment policy.

In NAUH’s view, a Medicare short stay begins with a physician’s initial diagnosis that a patient needs to be admitted to the hospital as an inpatient and is expected to remain at least two midnights or more.  Then, when the patient’s stay is ultimately shorter, NAUH believes that stay should be classified as a short stay for Medicare payment purposes.  A short stay should be reimbursed by Medicare based on Medicare transfer reimbursement policy – that is, for this day, Medicare should pay the hospital twice the per diem rate for the applicable DRG’s average length of stay.  This proposal is based on the generally accepted view that the greatest investment of resources for patient care occurs during the very beginning of a patient’s stay in the hospital and that even in a short stay, a hospital is expending comparable resources on patient care during that first day or two as it does when a patient stays longer.  This is the basis for current Medicare transfer payment policy and NAUH believes it should be the basis for Medicare short hospital stay payment policy as well.  Further, hospitals that serve large numbers of low-income patients and have medical education programs should not be put at a disadvantage when patients just have short stays, so NAUH further proposes that they receive Medicare DSH and medical education payments for these short stays as well.

NAUH’s entire letter to CMS can be found here.

See the MedPAC presentation “Hospital Short Stay Policy Issues” here.