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PPS Payment for Post-Acute Care Recommended by MedPAC

Posted by Crystal Parks on Jun 22, 2017 4:03:02 PM



The Medicare Payment Advisory Commission (MedPAC) June 2017 report urges Congress to act swiftly to revamp the payment system for the post-acute care space by moving away from fee-for-service (FFS) reimbursement.

The report, Medicare and the Health Care Delivery System, emphasized the commission’s previously-stated preference for transitioning to a unified post-acute care (PAC) prospective payment system (PPS) rather than FFS. Medicare reimbursement would be based on patient characteristics rather than the site of service.

The commission favors a unified PAC PPS payment encompassing home health agencies, skilled nursing facilities, inpatient rehabilitation facilities, and long-term care hospitals. According to the report, a unified PAC PPS would redistribute payments more equitably across patient conditions; payments would decrease for rehabilitation care unrelated to patient characteristics and increase for medically complex care. Greater equity in payments means providers would have less incentive to select certain patients over others.”

The commission recommended the new PAC PPS begin in 2021 and include a three-year transition. That would be three years earlier than the timetable laid out in the Improving Medicare Post-Acute Care Transformation (IMPACT) Act. The commission believes a 2021 start date for implementation would not be problematic, “assuming some regulatory alignment is underway that would begin to standardize requirements across the settings.” The report recommends that the “Secretary should align regulatory requirements across the PAC settings when the PPS is implemented.”

Additionally, the commission favors lowering the aggregate level of payments to Medicare providers by five percent “to more closely align with the cost of care,” since it found “Medicare payments exceeded providers’ costs by 14 percent across the PAC settings.” According to the report, the commission’s analyses indicate that “even if payments were lowered by five percent, the average payments across all stays and for the 30 clinical groups we examined would remain well above average cost of stays.”

The commission’s view that Medicare reimbursement rates are too high is not uncontroversial, with many providers noting that their margins are below two percent when Medicare and Medicaid payment is combined.

The recommended three-year transition to a PAC PPS is so limited in duration because although “the PAC PPS would change payments for many providers, the commission concludes that, because the majority of those that would experience decreases in payments had above-average profitability, the transition period could be short.”

Fortunately, there is no expectation that the MedPAC recommendations will move Congress into action in the near term.

Topics: pps payment


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