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Second Opinion

Learn about policy issues important to medical schools and teaching hospitals, with Executive Vice President Atul Grover, M.D., Ph.D.

Washington Highlights

MedPAC Discusses Hospital Short Stay Policy and Episode Bundles to Improve Care Efficiency

April 3, 2015—The April 2-3 meeting of the Medicare Payment Advisory Commission (MedPAC) began with a discussion and vote on a package of recommendations related to hospital short stay payment policy issues. MedPAC recommended:

  • Updating the recovery audit contractors (RAC) program to target reviews on hospitals with the most short stays, tie the contingency fee to a denial overturn rate, shorten the RAC look-back period, and withdraw “the two-midnight rule”’
  • Evaluating a formula-based payment penalty on hospitals with excess levels of short inpatient stays to replace RAC reviews of these stays

  • Expanding the three-day hospital stay requirement for skilled nursing facilities (SNF) coverage to allow up to two outpatient observation days to count towards meeting the criterion

  • Requiring beneficiary notification of outpatient observation status

  • Packaging payment for self-administered drugs during outpatient observations stays into the hospital outpatient prospective payment system

The commission unanimously voted in favor of the entire package of recommendations, which will be included in the June Report to Congress. Commissioner Warner Thomas highlighted that the reduction to RAC contingency fees for high overturn rates would have to be significant enough to make a material impact. Additionally, he explained that the recommendation directed toward better aligning the Part B rebilling period and the RAC lookback period should extend the Part B rebilling period beyond the current one year timeframe to make rebilling an effective recourse after a RAC denial.

While the MedPAC discussion carefully considered the recommendations focusing on RAC review and evaluating a penalty for hospitals with higher levels of short inpatient hospital stays, the discussion did not clearly define how a hospitals rate of short stays would be determined. 

The AAMC explained in a public comment that the association’s data analysis demonstrates that hospitals do not vary substantially in their share of short stays as a percentage of all Medicare cases. Instead, a hospital’s average number of short stays increases for larger hospitals with more Medicare volume. Accordingly, the AAMC expressed concern that these recommendations could target larger hospitals and major teaching hospitals and de-incentivize innovating to efficiently treat complex patients.

If MedPAC’s recommendation does not carefully clarify how hospitals’ relative volume of short stays will be compared for purposes of determining which hospitals will be subject to focused RAC review, targeting hospitals with a higher average number of short stays could merely target larger hospitals that treat more Medicare patients. The AAMC also strongly encouraged MedPAC to require a risk adjustment if the commission adopted this recommendation. This is particularly important given that the same hospitals that could be disproportionately impacted also treat the sickest and most complex patients and this approach to targeting does not take into account the medical necessity of short stays.

MedPAC also started a discussion about potential ways to improve efficiencies in inpatient episode bundles. Staff analyzed the Medicare Spending Per Beneficiary (MSPB), an efficiency measure in the Hospital Value-Based Purchasing program which accounts for costs three days prior to admission and ends thirty days post discharge, and noted post-acute care was the primary driver for variation. Staff presented four possible options to improve efficiency: increasing the weight of MSBP; developing a MSPB for post-acute care (PAC); guiding beneficiaries to high-value PACs; and identifying ways to reduce the total number of admissions. During the discussion, several commissioners supported the different options. Herb Kuhn and Chairman Glen Hackbarth noted the need for the hospital performance programs to work together, rather than adding a new layer of measurement. Other commissioners considered other levers for accountability including making the hospital responsible for PAC, or having accountable care organizations responsible for admissions.

The meeting included discussions of polypharmacy and opioid use Part D issues, sharing risk in Medicare Part D, measuring low-value care, bundling oncology services as a means to improve Part B drug spending value and care coordination, while permitting clinicians to decide on the value of drugs; and continuing a discussion of ways to synchronize Medicare policies across payment models.

The meeting was the last one chaired by Glenn Hackbarth who is stepping down after chairing the commission for 12 years.

Contact:

Mary Patton Wheatley, M.S.
Director, Health Care Affairs
Telephone: 202-862-6297
Email: mwheatley@aamc.org

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Washington Highlights, a weekly electronic newsletter, features brief updates on the latest legislative and regulatory activities affecting medical schools and teaching hospitals.


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Jason Kleinman
Sr. Legislative Analyst, Govt. Relations
Telephone: 202-903-0806
Email: jkleinman@aamc.org