Serving the home health, home care and hospice industry since 1999.

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by Tim Rowan

After careful analysis, MedPAC has determined that bundled payment plans leave hospitals with the exact same revenue they were receiving under Fee For Service. They then share with post-acute partners whatever is left over. This is just one of the stark data presented by MedPAC Commissioner David Grabowski, PhD, at last week's "Senior Care 360," a Lincoln Healthcare Leadership conference.

David GrabowskiDavid Grabowski

A Harvard professor of healthcare policy, Commissioner Grabowski revealed more insight into MedPAC decision-making than post-acute providers normally get to hear. "Whoever controls the bundle usually gets the revenue they want," he told an audience composed of home health, home care, hospice, SNF, and senior residential organization owners. "We are thinking bundles may not be the best way to manage healthcare costs."

He described possible future solutions to this problem, calling them "Alternative Payment Models." "In theory," he said, "APMs can improve care coordination, encourage use of better providers, lower use of inappropriate services, meaning using physicians and post-acute care to avoid hospital readmissions and emergency department utilization."

He also sees ACOs as a transitional solution that may not become a permanent healthcare fixture. "While we did see some reduction in post-acute facility referrals and total in-patient days from ACOs," he explained, "we did not measure significant changes in 30-day readmissions, use of highly rated SNFs, or mortality." Referencing a research paper he co-wrote for the New England Journal of Medicine, Grabowski stated that the goal of APMs is to "push post-acute care downstream, from SNF to home health for example, and ultimately to reduce the total number of post-acute days." (for an example of one home health agency's success in the effort to use fewer SNF days and more home health days, see The Rowan Report, 7/31/19, "Hospital-to-Home Program Saves Lives, Slashes Costs")

Medicare Advantage Booming

Grabowski spoke of the growing popularity of Medicare Advantage and its impact on patients and providers He spoke in the context of explaining how MedPAC uses data to determine its recommendations to Congress. MA plans, he explained, covered 6.9 million patients in 1999 but grew to 20.4 million lives by 2018 and continues to expand.

"We have found that they pay hospitals and physicians at full Medicare rates," he added, "but they negotiate lower rates with post-acute care providers, including Skilled Nursing Facilities, Rehab Hospitals, and Home Health. They can do this because post-acute does not enjoy the same bargaining strength that large institutions do. The first rule of Alternative Payment Models is, 'Better to push down on someone else's revenue than your own.'"

He said MedPAC has also discovered that Medicare Advantage contracts more often with lower quality SNFs. He could only explain this phenomenon with the theory that they prefer to deal with organizations willing to accept lower payment levels if the alternative is no payments at all. He quoted fellow MedPAC commissioner and Harvard Medical School Professor of Health Care Policy, Michael Chernew, who theorizes that MA plans gravitate toward lower quality providers this way: "Everybody wants to pay for value until they have to actually pay. Then they just want to pay less."

MedPAC Report to Congress, March 2019

"In light of our payment adequacy analyses, we recommend positive payment updates in 2020 for three FFS payment systems (hospital, long-term care hospital, and dialysis); zero updates for three systems (physician, skilled nursing facility, and ambulatory surgical center); and negative updates for three systems (home health, inpatient rehabilitation facility, and hospice)."

Unified PPS Considered

Looking to its future recommendations, Grabowski revealed that MedPAC is looking at a unified PPS system. It would standardize payments across four post-acute settings, SNF, Home Health, Rehab hospitals, and Long Term Care. Each provider would be paid based on patient condition, regardless of the patient's care location. Research into how to accomplish this idea is in the early stages and Grabowski did not elaborate further. He did, however, add that extending Medicare Advantage to hospice someday is under discussion.

MedPAC introduced the Unified PAC PPS concept in its June, 2019 report to Congress:

"As mandated by the Congress, in June 2016, the Commission evaluated a prototype design and concluded a unified PAC prospective payment system (PPS), as opposed to the four separate payment systems used currently, would establish accurate payments and increase the equity of payments across conditions. Because the variation in profitability by clinical condition would be narrower compared with current payment policy, providers would have less incentive to selectively admit certain types of patients over others. Since 2016, the Commission has continued to examine various issues regarding a PAC PPS, including the level of aggregate PAC spending to base payments, the need for a transition, the monitoring required to keep payments aligned with the cost of care, and a way to increase the equity of PAC payments before a PAC PPS is implemented."

Patient perspective not a factor

Lastly, Grabowski also revealed that he and his colleagues on the Commission see their role as exclusively a financial one. They do not look at the impact of their recommendations on people. The impact of payment policy on patient preference to remain in their homes, patient satisfaction, and patient quality of life are not factors they take into consideration.


©2019 by Rowan Consulting Associates, Inc., Colorado Springs, CO. All rights reserved. This article originally appeared in Tim Rowan's Home Care Technology Report. One copy may be printed for personal use; further reproduction by permission only.