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MedPAC Calls for New Payment System and Rate Cut for Home Health

Posted on Monday, June 24, 2019 3:19 AM

MedPAC issued its June report last week, and it contained information on a possible unified payment model for post-acute care providers and called for a five percent rate cut for home health.

The Commission considered an episode-based design for post-acute payment but rejected it on the grounds that it “would result in large overpayments for relatively short episodes and underpayments for long ones.” Instead, the MedPAC “believes that a stay-based design is the better initial strategy for CMS (the Centers for Medicare & Medicaid Services) to pursue.”  The Commissioners believe that past provider behavior “suggests that some providers would respond to the financial incentives by avoiding beneficiaries who would likely require extended PAC and by basing treatment decisions (such as whom to admit and when to discharge or transfer a patient) on financial considerations rather than what is best for the beneficiary.”

Under the stay-based design favored by MedPAC, the payment-to-cost ratio of home health services would be reduced from 1.18 to 1.12, resulting in about a five percent rate cut.

The Commissioners listed the benefits of a stay-based design:

  • Payments are aligned with costs for most patient groups
  • Less likely to result in stinting on care if provider can generate additional stays
  • Streamlines four PPSs to one
  • Easier for CMS to implement
  • Involves less change for providers
  • Encourages shorter stays
  • Should result in more handoffs to other providers.

MedPAC also explored alleged flaws in the way home health providers provide data about their patients’ ability to perform activities of daily living. “Functional status and changes in function are used to establish care plans for patients, set payments, and measure quality of care,” the Commissioners write. “However, when payment is tied to patients’ functional status, providers can report this information in ways that raise payments rather than capture patients’ actual clinical care needs. And because FFS payments are used to establish payments for Medicare Advantage and alternative payment models (such as ACOs and bundled payments), the effects on payments extend well beyond traditional Medicare. Furthermore, the reported patient functional status data can improve a provider’s outcome rates, thus misleading entities to include the provider in their network and beneficiaries to select a provider based on outcomes that have not been achieved. Therefore, policymakers need to reconsider whether and how functional status data are used to establish payments and gauge provider performance.”  The Commission believes that this can lead to faulty reporting by home health agencies.

Source: NAHC Report


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