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Last Post on the 2014 MedPAC Report

By May 2, 2014Commentary

Finishing off our exhaustive review of the 2014 MedPAC report to Congress, today we focus on the post-acute arena–skilled nursing, home care, specialized rehab and long-term hospitals.  This sector has in many ways been the most troubling for the Medicare program, with home health care being a large contributor to fraud and extensive quality and appropriateness of utilization issues across the sector.  The Commission has advocated a variety of reforms over the last few years, but few have been implemented.  This year one item the Commission highlights again is the difference in payments for the same services in different settings.  For example, if home health care would cost less than a skilled nursing stay and be equally appropriate for a patient, that would be the appropriate treatment but often isn’t because a provider may benefit from having the patient in the more expensive setting.  Compounding this problem is the fact that for patients needing post-acute care, while an assessment is often required as a condition to payment, the assessments vary across settings, making it difficult for reviewers to ascertain whether a different setting would have been better.  So it addition to equalizing payments, MedPAC recommends that a common assessment be used, and that the results of the assessment should guide the patient to the least expensive setting.  Of course, CMS actually has tested a common assessment but has not implemented it, for reasons that only that absurdly bureaucratic agency could possibly comprehend.

There are about 15,000 skilled nursing facilities, which in 2012 had 2.4 million Medicare stays at a cost of $28.7 billion to the program.  Overall Medicare margins were over 13% in 2012, which although down from 21% in 2011, represents the tenth straight year of double-digit margins.  As it did last year, the Commission strongly encourages Congress and CMS to change the payment system and to rebase payments, reducing CMS outlays in this category.  SNF access was good and quality has not improved in the last few years.  There are around 12,300 home health agencies participating in Medicare and in 2012 they provided services to 3.4 million beneficiaries at a cost of $18 billion.  Access was good, utilization down slightly, as was overall spending.  As with skilled nursing care, margins are high and have been for several years, and MedPAC keeps recommending that the payment structure be changed and lowered.  Home health care agencies have been very good at playing games to maximize reimbursement under the episode-based payment method.  Inpatient rehabilitation facilities also have high margins, so the Commission recommended no payment increase for 2015.  This was one sector that does appear to be experiencing some improvement in performance on quality measures.  While long-term care hospitals’ margins are not quite as high, they are also good, and the Commission recommended no payment increase for these providers either.  Overall, it is apparent that this is likely the most profitable sector of Medicare services and therefore warrants intense attention from CMS to reform the payment methods.

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