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MedPAC Convenes to Discuss Site Neutral Payments for IRFs and SNFs and Quality Measurement Across Medicare

March 7, 2014—The Medicare Payment Advisory Commission (MedPAC) March 6-7 met to discuss site-neutral payments for inpatient rehabilitation facilities (IRFs) and skilled nursing facilities (SNFs), measuring quality across Medicare’s delivery systems, payment policies that would promote the use of services based on clinical evidence, per beneficiary payment for primary care, synchronizing Medicare’s benchmarks across payment systems, and improving risk adjustment in the Medicare program. The commissioners did not make any recommendations.

The meeting commenced with a discussion on the possibility of implementing site-neutral payments for IRF and SNF patients with select conditions, including joint replacements, hip and femur procedures, and strokes. The presentation highlighted the fact that while IRFs are licensed as hospitals and are subject to several more stringent regulatory requirements, the characteristics of beneficiaries admitted to IRFs and SNFs in the same market are actually quite similar.

The commissioners generally found IRFs and SNFs suitable for site-neutral payments because there are not significant differences between IRFs and SNFs in beneficiary characteristics, such as the prevalence of comorbidities and functional status at admission. MedPAC staff estimated that making SNF-level payments to IRFs for the selected cases would reduce Medicare payments to IRFs by four percent, an impact that was similar across non-profit, for-profit, hospital-based, and freestanding IRFs.

Under the staff models, reductions would not be applied to IRF add-on payments such as indirect medical education (IME), disproportionate share hospital (DSH), and outlier payments. There was a general consensus to move forward on site-neutral payments for SNFs and IRFs, and that elective joint replacements would be a good place to start.

Next, the commission focused on the future of measuring quality across Medicare’s delivery systems. This was a follow-up from the November discussion on refocusing the quality strategy to enable comparisons of fee-for-service (FFS), Medicare Advantage (MA), and accountable care organizations (ACOs) in health care market areas [see Washington Highlights, Nov. 8].

MedPAC staff outlined concerns with the current quality strategy, which reinforces incentives for quantity over quality of care, and highlighted an alternative strategy focusing on outcomes and measures of overuse for the FFS community and measures of underuse for the MA and ACO populations. As examples of inappropriate overuse in clinical care, staff highlighted three imaging measures currently being publicly reported: patients receiving an MRI for low back pain without first attempting conservative treatments, CT combination scans, and the use of cardiac imaging stress tests before low-risk outpatient surgery.

The commissioners cited the high prevalence of imaging tests between 2010 and 2012, and concluded that many patients inappropriately received repeats of these tests within a three-year period. The commissioners discussed whether overuse and underuse measures belonged in a comprehensive quality strategy, and whether to apply these measures in all three payment systems. The commissioners will discuss how to properly define the measurement areas for these three populations during the April meeting.

Commissioners also continued their discussion from November on the impending end of the primary care bonus payment in 2015 that was enacted under the Affordable Care Act (ACA, P.L. 111-148 and P.L. 111-152). This topic is in direct relation to concerns the commission has that primary care providers are not adequately reimbursed compared to specialist physicians under the current Medicare fee schedule.

The commissioners discussed whether to support an extension of the bonus payment, which would require congressional action, or if a per-beneficiary payment would be a more appropriate direction to consider. The commission was more in favor of the per-beneficiary payment option and will consider this in future discussions regarding payment adequacy for primary care services under the fee schedule.

The meeting continued with a discussion on the feasibility of synchronizing financial benchmarks across MA and ACO payment models and whether financial neutrality could be applied across all payment models including FFS (i.e., ACO and MA benchmarks = 100% of local FFS spending). Currently, MA is paid a risk-adjusted capitation payment based on MA benchmarks and ACOs are paid at FFS rates with a potential bonus or penalty based on quality and spending targets.

Options discussed include budget neutral payment adjustments for ACOs and MA plans based on quality and moving ACOs to a prospective benchmarking system currently used by MA plans, the CMS-Hierarchical Conditions Category (HCC) risk adjustment model. The commission considers this topic to be in the very early stages of discussion and plans to continue moving forward with next steps to develop guidelines for future policy recommendations based on the principles of quality, beneficiary access, efficiency, and provider viability. They also believe future data on each payment model will be needed before pursuing any policy recommendations.

The next MedPAC meeting is scheduled for April 3-4.


Len Marquez
Director, Government Relations
Telephone: 202-862-6281


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