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Post-Acute Care Payment Policies

Posted on: Thursday, 24 November 2005, 03:02 CST

By Ferman, John H

Why Medicare is looking to make care easier for patients.

Among Washington's health policymakers and opinion leaders, it is generally acknowledged that the Medicare post-acute care payment systems are in need of reform. Many think this need is at a critical stage.

As the spotlight brightens on this issue, reform efforts are now getting underway. This column highlights the nature of these efforts and helps the reader think through their implications.

The Problem

The fundamental problem is that due to payment system incentives, providers currently base their decisions about where the beneficiaries receive postacute care services on Medicare payments, not on a patients medical and resource needs. This is because of an overlap of post-acute care services and a lack of criteria for delineating the appropriate treatment setting.

As a result, researchers find there are cases in which Medicare vasdy overpays for post-acute care, such as that in longterm care hospitals (LTCHs) and others in which treatment occurs in settings that may be poorly equipped to handle certain complex cases, such as some skilled nursing facilities (SNFs).

In its June 2004 Report to Congress, the Medicare Payment Advisory Commission (MedPAC) reported that payment for a hip fracture patient in 2004 was $44,633 per case in an LTCH, $18,487 in an inpatient rehabilitation facility (IRF), and $10,618 in an SNE

And in a subsequent study reported in the June 2005 Report to Congress, MedPAC, while noting that the evidence is not definitive and that further study was appropriate, stated, "the fact that patients going home after surgery [for a hip or knee replacement] do better than those in either SNFs or IRFs suggests that patient selection is strongly present in these data and we cannot fully discount its effects."

Background

Post-acute care generally follows an acute hospitalization and is provided in four settings-SNFs, inpatient rehabilitation facilities (IRFs), LTCHs, and the home. Eligible beneficiaries who are referred from the community and who use home health services without a prior hospitalization also use post-acute care services.

In 2002, one-third of Medicare beneficiaries discharged from acute hospitals used post-acute care within one day of leaving the hospital-13 percent used SNFs, 11 percent used home health, 5 percent LTCH, IRFs, and inpatient psychiatrie facilities, and 4 percent used multiple post-acute care settings. In 2003 post-acute care made up about 11 percent of Medicares total spending or about $31.3 billion.

Medicare reimburses for these services in these settings according to four separate payment methodologies. In addition, with one exception, each setting uses a different patient assessment instrument to evaluate the level of care a patient requires. LTCHs are not required to use a patient assessment tool. Each assessment instrument and payment system was developed separately, and the payment rates have evolved over time into separate spheres of care. As a result the current payment methods differ based on the setting in which the beneficiary receives care.

Research and Development

The first step toward post-acute care payment reform is to research and develop a post-acute care patient assessment survey instrument that is able to monitor and evaluate the quality of care and patient outcomes across post-acute care settings. This will allow Medicare to compare the care needs or outcomes of patients who are treated by different types of post-acute care providers. Currently, such common information is not available.

In recognition that the current assessment tools do not collect information that is easily and meaningfully integrated, CMS plans to develop a new patient assessment tool that can be used to establish payments and evaluate patient outcomes across all four postacute settings. Medicare officials in testimony on June 16, 2005, before the House Ways and Means Committees Health Subcommittee announced that a test of such a patient assessment tool would begin in early 2006. While Congress, in legislation enacted five years ago, mandated that this report be delivered to Congress no later than January 1, 2005, Medicare officials could not say when a report of this evaluation would be submitted to Congress.

As an interim step, however, Medicare has been urged to use site- specific admission criteria to place patients in the most appropriate post-acute setting. In 2004 MedPAC recommended that Medicare develop patient and facility criteria to ensure that patients treated in LTCHs are medically complex and have a good chance of improvement. And in April 2005, the Government Accountability Office (GAO) recommended that Medicare develop more specific descriptions of the patients appropriate for IRFs. In June 2005, MedPAC urged that these suggestions be expanded, as establishing settingspecific criteria could delineate the service capability and staffing levels for the provider, and could identify the clinical characteristics and resource needs of the patients.

Revised IRF Criteria Will Affect Utilization

Meanwhile, as a result of a rule adopted in 2004, fewer beneficiaries with a single hip or knee replacement will likely use IRF care. The new rule revises the so-called "75 percent rule." This rule allows Medicare to strip an IRF of its designation if it does not admit at least 75 percent of its total in-patient population with one or more conditions from a list that Medicare specifies. The 2004 revision eliminated "polyarthritis" (the diagnosis for hip and knee replacement patients)-the most frequent diagnosis for beneficiaries who used IRFs in 2002-and replaced it with four more complex arthritis-related conditions. The changes are being phased in over four years. The result of this change is that many patients will likely stay in the hospital longer, be referred to SNFs, or be sent home with home-health or outpatient therapy. Other such beneficiaries may continue to use IRFs; the rule provides for 25 percent of IRF patients who have conditions not on the list.

MedPAC reports that the new rule defining IRFs has already affected referral patterns. It reports that some IRFs will no longer accept joint replacement patients and that acute hospital lengths of stay have increased slightly as a result. IRFs with a large referral base would have fewer problems meeting the new criteria, but IRFs with a smaller referral base may have greater difficulty complying. Some orthopedic surgeons reported having developed protocols for home-health agencies so that these agencies could provide more intensive rehabilitation services to patients after hip or knee replacement.

The IRF's national trade association, the American Medical Rehabilitation Providers Association (AMRPA), claimed that the rule would cut IRF Medicare payments over $165 million in FY 2005- Medicare had estimated just $10 million. AMRPA said that the admission denial rate would reach 6.29 percent or nearly 29,000 Medicare beneficiaries-Medicare had estimated a 0.38 percent denial rate.

Implications

First, providers should assume that Medicare will revise its post- acute payment policies to only pay for the services required for a patient's unique needs. That is, payment will not be site specific, but rather patient specific. The effect of the process will channel the beneficiary to the lowest-cost post-acute care service, for example an SNF instead of an IRF for most uncomplicated single hip and knee replacements.

Acute hospitals may encounter situations in which the Medicare- determined "appropriate post-acute care provider" may not be willing to admit the patient because of case complexities, notwithstanding the patient assessment results. This may, in turn, mean that the hospital cannot discharge the beneficiary until the case complexity has been eased.

On the post-acute care provider level-providers may find that it will be harder to sustain their Medicare profit margins as Medicare better controls their case mix.

Outlook

While it is unlikely that Congress will enact major Medicare legislation in 2005, such legislation is much more likely in 2006. And post-acute care payment reform could be a significant component of such legislation.

Acute and post-acute care providers should closely monitor Medicares post-acute care payment reform efforts and ensure that their members of Congress are informed as to the implications of such reform on their ability to treat Medicare beneficiaries.

Health Policy Alternatives, Inc.

400 N. Capitol St. NW, Ste,. 799

Washington, DC 20001-1536

(202) 737-3390

John H. Ferman

John H. Ferman is principal of Health Policy Alternatives, Inc., in Washington, D.C.

Copyright Health Administration Press Sep/Oct 2005

Source: Healthcare Executive

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