AMRPA Access


MedPAC Holds Annual Payment Update Sessions on Post-Acute Care Settings, Including IRFs

By AMRPA Headquarters posted 12-16-2020 10:00


By Remy Kerr, MPH, AMRPA Health Policy and Research Manager

On December 3-4, the Medicare Payment Advisory Commission (MedPAC) convened for a virtual public meeting. The meeting included MedPAC’s annual sessions for evaluating payment adequacy and providing payment update recommendations for Medicare-certified inpatient rehabilitation hospitals and units (IRFs), skilled nursing facilities (SNFs), home health agencies (HHAs), and long-term care hospitals (LTCHs). Of note, MedPAC stated that the draft recommendations are based on 2019 data, and that the Commission believes the impacts of the COVID-19 public health emergency (PHE) should be addressed through separate, targeted relief (which may be discussed in future dedicated MedPAC discussions) rather than annual Medicare payment updates for each of the respective settings.  The following blog post provides a high-level overview of each session; if you wish to discuss any of the sessions in greater detail, please reach out to AMRPA staff.

In the IRF payment update session, MedPAC staff recommended a 5% payment reduction to the FY 2021 Medicare base payment rate for fiscal year (FY) 2022, which commissioners strongly supported. Additionally, MedPAC recommended reiterating the March 2016 recommendation to the Secretary to conduct focused medical record reviews of IRFs with unusual patterns of case mix and coding as well as to expand the high-cost outlier pool. According to MedPAC’s analysis of the IRF industry in 2019, 58% of IRF discharges were Medicare beneficiaries, with an average length of stay (ALOS) of 12.6 days. Compared to 2018, there was a slight decrease in the number of IRF facilities down to 1,152 (1,170 in 2018). There was also a slight increase from 408,000 stays in 2018 to 409,000 stays in 2019 across 363,000 Medicare beneficiaries. IRF care accounted for $8.7 billion of Medicare’s total spending in 2019.  MedPAC asserted that each of the payment adequacy indicators for the IRF setting as of 2019 are positive. In addition, MedPAC staff conducted a payment-to-cost ratio analysis utilizing Rehabilitation Impairment Categories (RICs), and found that payments across all conditions are 11% higher than the cost to treat. Lastly, MedPAC’s analysis found the IRF aggregate Medicare margin to be 14.3% for 2019. Throughout the discussion portion of the session, a number of commissioners raised significant concern with IRF Medicare margins. Additionally, several commissioners associated Medicare Advantage (MA) plans restricting IRF coverage as rationale that IRF care is not a high value service, or warrants MedPAC recommending more significant restrictions or guardrails for IRF care.

In the SNF payment update session, MedPAC staff recommended a zero update to the FY 2021 Medicare base payment rate for FY 2022, which commissioners supported. According to MedPAC’s analysis, the SNF industry’s payment adequacy indicators are positive. The SNF aggregate Medicare margin in 2019 was 11.3%, and MedPAC asserted this is the twentieth consecutive year SNFs had an aggregate Medicare margin above 10%. MedPAC also analyzed the difference in payments between Medicare Advantage (MA) and fee-for-service (FFS). Based on this analysis MedPAC found that average FFS SNF payments per day were 20% or more higher than average MA SNF payments per day, and those differences could not be explained by case-mix. MedPAC also asserted that SNFs were particularly adversely impacted by the PHE, with volume yet to rebound to pre-pandemic levels and unlikely to return for a long time. Within the commissioner discussion portion of the session, commissioners spent a significant amount of time discussing the impact of the COVID-19 PHE. Some commissioners expressed concern that SNF capacity would not rebound for a significant amount of time, as SNFs will likely maintain single rooms rather than quickly reverting back to double occupancy post-PHE. Commissioners were also concerned that there will continue to be a shift of patients being discharged to HHA rather than SNF from acute-care. There was also considerable discussion surrounding the connection between Medicaid and Medicare payments within the SNF sector, and Commission Chair Michael Chernew (Harvard Medical School) suggested MedPAC more directly work with the Medicaid Payment Advisory Commission (MacPAC) in the future on the issue.

In the HHA payment update session, MedPAC recommended a 5% reduction to the CY 2021 Medicare payment update for CY 2022, and commissioners supported the recommendation. According to MedPAC, home health has had consistently high margins, averaging over 16% since 2001. To address these high margins, a new payment system was implemented for HHAs in 2020, however, MedPAC does not yet have data detailing the effects of the new payment system. Per MedPAC’s analysis, HHAs payment adequacy indicators are all positive, with a 15.8% aggregate Medicare margin in 2019. The commissioner discussion section was brief with commissioners unanimously supporting the proposed update. Of note, Commissioner Brian DeBusk (DeRoyal Industries) raised the issue of the unified PAC PPS model work, and stated he hopes HHAs will be approached differently in such a model due to their much lower overhead. Commissioners also discussed the differences between MA and FFS contracting with HHAs.

In the LTCH payment update session, MedPAC recommended a 2% update to the FY 2021 Medicare base payment rate for FY 2022, which commissioners supported. MedPAC staff provided an update on the transition to a dual-payment rate structure for LTCHs. As of FY 2021 the new payment system is fully phased in; however, due to the PHE, site-neutral payments are waived for the duration of the declaration. LTCHs’ payment adequacy indicators are mixed as expected due to the new payment system. LTCHs with a share of cases meeting the LTCH PPS criteria had an aggregate Medicare margin of 2.9% in 2019. During the discussion portion, several commissioners praised the role LTCHs had played in responding the PHE by serving as overflow for acute-care hospitals and caring for SNF-level patients unable to be discharged to a nursing home. A number of commissioners commented that prior to the pandemic, they had questioned the value of LTCHs; however, due to LTCHs’ response to the PHE now have a better understanding of their value. A few commissioners cautioned that while they agree LTCHs have been helpful during the PHE, it should not be justification for supporting or opposing the payment update. Commissioners also requested MedPAC consider development better quality measures for LTCH patients including patient and/or family satisfaction for discussion in a future MedPAC meeting.

Commissioners agreed with the recommendation, which will be formalized through an expedited vote in January for inclusion in the March 2021 Report to Congress. AMRPA will be engaging with MedPAC on the recommendations through correspondence and meetings, and will keep members apprised of any updates through AMRPA Access and AMRPA’s Off the Record weekly newsletter. If you have any questions related to MedPAC please contact Remy Kerr, AMRPA Health Policy and Research Manager.