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CMS Gets Backing for Alternative Payment Tests

By Kerry Young, CQ Roll Call

August 20, 2015 -- Congress' top advisers on Medicare gave their backing this week to plans to force hospitals and home health agencies to participate in pilot payment programs that carry financial risk, a move that could help shield the big government health program from provider backlash.

The Medicare Payment Advisory Commission (MedPAC) said it supports a proposed program that would test bundled payments on hospitals that perform hip and knee replacements in 75 selected regions of the country. MedPAC also offered largely positive views for a plan to force home health agencies in nine states to participate in a test where reimbursements might be raised or cut based on performance. The observations were made in separate comments submitted to the Centers for Medicare and Medicaid Services (CMS) about two proposed rules. 

MedPAC "supports the planned program" for testing an alternative payment model for hip-and-knee replacements, wrote Francis J. Crosson, the chairman of the panel, in an Aug. 19 letter to CMS. Medicare's Innovation Center "was created to test exactly this kind of alternative payment model."

On the home health model, MedPAC noted that the Affordable Care Act directed CMS to create such a program for testing alternative payments. Administrators proposed applying the test to agencies in nine states: Arizona, Florida, Iowa, Maryland, Massachusetts, Nebraska, North Carolina, Tennessee, and Washington.

"The compulsory nature of the model addresses a major limitation of past demonstrations," MedPAC's Crosson wrote in an Aug. 18 letter to CMS. "The experience of the past indicates that agencies avoid demonstrations that present financial risk, resulting in relatively low provider participation."

In general, the home health test, known as a value-based purchasing model, "has many desirable features, and could be improved with several refinements," Crosson said.

The efforts are part of a broader shift to move Medicare's more than $600 billion in annual spending away a pattern of paying for services provided and toward pegging reimbursements to the quality of care delivered. The pilots both could put providers at risk for losing money and are expected to draw protests. Health care interest groups will make their objections known to lawmakers, who might then question CMS' approach.

Lawmakers in both parties, though, rely on MedPAC in evaluating CMS' actions. Its support for the the test programs "is a big deal for CMS," said Dan Mendelson, chief executive of Avalere Health, and a former associate director for health at the White House Office of Management and Budget.

"It gives CMS a wider operating berth from which to promulgate these kinds of policies," Mendelson said in a Thursday interview.

CMS has issued a special proposed rule to create the test program for hip-and-knee replacements, for which comments are due by Sept. 8. The home health test program would be created as part of the annual CMS payment rule for these services, for which comments are due by Sept.4.

MedPAC's more detailed suggestions for payment changes are important in providing insight into other revisions that the agency might make, said Joseph Antos, a researcher at the American Enterprise Institute. CMS appears set on making the participation mandatory for the home-health test, Antos wrote in an email to CQ HealthBeat. These may be some room for revisions in other aspects, which would be welcomed by many organizations.

"CMS has not been flexible enough in the early design stages and has not been eager to incorporate suggestions—it has been much more a top-down approach when some collaboration with the providers might produce a better final design," Antos said.

Gail Wilensky, a former chair of MedPAC who also directed Medicare and Medicaid from 1990 to 1992, had a similar objection to the design of the hip-and-knee replacement test program, saying she was "a little disappointed" with the proposal.

"CMS specified that the hospitals should get the payment as opposed to leaving it open" to the possibility of physician groups seeking to direct the care, she said. "It's one of these overspecified models."

The model proposed by CMS would hold the hospitals in which a hip or knee replacement takes place accountable for the costs and quality of care from the time of the surgery through the 90 days following it, considering this an "episode" of care. Hospitals could get extra money or be forced to repay Medicare depending on how their care was judged and the costs incurred for each case. Hip and knee replacements are the most common surgery Medicare pays for on an inpatient basis, as opposed to paying under the generally less generous outpatient system. In 2013, there were more than 400,000 inpatient primary procedures costing more than $7 billion for hospitalization alone. 

Wilensky agreed that getting MedPAC's support for this payment model test is a help for CMS, but noted that lawmakers often ignore the counsel of its advisory group when it runs counter to their own plans. She recalled a discussion she had as MedPAC chair with former House Ways and Means Chairman Bill Thomas, R-Calif., during which he told her that "when MedPAC makes recommendations we like, we like it. But when they make recommendations we don't like, we don't like it."

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