Senate Finance Committee Health Reform Option Paper Proposals Would Impact Post-Acute Care Providers

Posted by Jason Greis on May 17, 2009 under Articles | Be the First to Comment |  Print

On April 29, 2009 the Senate Finance Committee (“Committee”) released the first of three health reform option papers exploring proposals for reducing costs and improving quality and efficiency in the country’s health care delivery system.  The second option paper addressing potential solutions for reforming health coverage decisions was released on May 14, and the final option paper discussing solutions for financing health care reform is scheduled to be released on May 20.  The policy options contained in the first option paper would shift Medicare payments to post-acute care providers from volume‐based to value‐based purchasing by providing new payment incentives for care that contributes to positive patient outcomes.  The first option paper contains a number of proposals that, if enacted, would significantly affect Medicare payments to long-term acute care hospitals (“LTACH”).

1.  Reducing Preventable Hospital Readmissions

 The position paper contain a proposal for reducing preventable hospital readmissions and establishing payment incentives intended to improve patient care by encouraging greater care coordination among acute care hospitals and post-acute care providers.  Starting in fiscal year (“FY”) 2010, CMS would begin calculating national and hospital-specific readmission rate data for short-term acute-care hospitals to determine the eight conditions with the highest volume and rates of readmission. 

In FY 2011, CMS would provide readmission rate information to short-term acute-care hospitals and would inform them of their readmission rates in relation to a national readmissions benchmark for each of the selected conditions.  The readmissions benchmark would include all readmissions that are the result of complications or related conditions, but would exclude readmissions that are not potentially preventable (i.e., planned readmissions or readmissions related to cancer care, burn care, trauma care, and scheduled surgeries).

In FY 2013, short-term acute-care hospitals with readmission rates above the 75th percentile for selected conditions would be subject to a payment withhold on a MS-DRG-by-MS-DRG basis.  Such a withhold would be based on the prior year’s performance and would be equal to 20% of the MS-DRG payment amount.  Hospitals subject to a payment withhold could be reimbursed for these funds, not to exceed the withhold amounts in a single year, if the patients involved do not have preventable readmissions within thirty days of discharge.  The readmissions policy would not apply to conditions included in the bundled payment discussed below, and the readmissions policy would expire once the bundled payment policy is fully implemented.

2.  Post-Acute Payment Bundling

Beginning in FY 2015, short-term acute-care hospital services and post-acute care provider services occurring or initiated within thirty days of discharge from a short-term acute hospital would be paid through a bundled payment.  Under this policy, post-acute bundled payments would be made for LTACH, home health, skilled nursing facility, and rehabilitation hospital services.  Short-term acute-care hospitals or other eligible entities would receive the bundled payment for each patient, regardless of whether the patient receives post-acute care services.  No additional payments would be made to the hospital or organizing provider for readmissions during this timeframe and Medicare would no longer make separate payments to post-acute care providers for care initiated within thirty days post-discharge.

Bundled payments would be implemented in three phases.  Phase one would be implemented in FY 2015 and would apply to admissions for conditions that account for the top 20% of post-acute spending.  Phase two would be implemented in FY 2017 and would apply to admissions for conditions that would account for the next 30% of post-acute care spending.  Starting in FY 2019, the final phase of bundling would be implemented and would include all other conditions and MS-DRGs that account for the remaining 50% of post-acute care spending.

The bundled payments would be calculated as the inpatient MS-DRG amount plus post-acute care costs of treating patients in that MS-DRG.  This bundled payment amount would be adjusted to capture savings from the expected efficiencies gained from improving patient care and provider coordination within the bundled payment system.  Also included in the bundled payment would be expected or planned readmissions within the 30-day post-acute timeframes.   

 CMS would be permitted to waive applicable laws, as appropriate, to implement these policies and to develop patient protection rules to ensure that patients receive appropriate post-acute care and that access to care is maintained.

3.  Quality Reporting

LTACHs and inpatient rehabilitation facilities (“IRF”) would be required to perform quality reporting.  CMS would be required to select quality measures for LTACHs and IRFs by 2011 and implement mandatory quality measure reporting programs by 2012.  Selected measures would be endorsed by a consensus-based entity under contract with CMS.  The selected measures would cover, to the extent feasible, all dimensions of quality as well as efficiency of care.

4.  Value-Based Purchasing and Information Technology

The option paper also contained preliminary proposals for developing value-based purchasing programs for LTACHs and IRFs, and extending the Health Information Technology incentives provided to short-term acute care hospitals under the American Recovery and Reinvestment Act to LTACHs and other post-acute care providers.

5.  Unanswered Questions

 The proposals raised a number of questions from National Association of Long Term Hospital (“NALTH”) members and conference attendees during the organization’s 2009 Annual Meeting in Washington, D.C. including:

• If the proposed bundled payment policy is only intended to curb preventable readmissions within the first thirty days after discharge from a short-term acute care hospital, would LTACHs still be entitled to payment under the LTCH-PPS beginning on day 31?
• What laws (i.e., Stark and Federal Anti-Kickback), if any, would CMS waive to implement the new bundled payment policy?
• Bob Desotelle, President and CEO of Asheville Specialty Hospital, inquired how legislators would ensure that post-acute care providers are not penalized for patient non-compliance that could be misconstrued as a preventable readmission?

According to Neleen Eisinger, one of Senator Max Baucus’ congressional staffers, who addressed NALTH conference members on May 1, 2009, these are issues that the Senate Finance Committee hopes the post-acute care industry will raise and to which the industry should propose solutions.  Comments to the option paper were due to the Senate Finance Committee by May 15, 2009. 

Jason S. Greis
312.849.8217
jgreis@mcguirewoods.com