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MedPAC Approves Array of Medicare Payment Recommendations

By Mary Agnes Carey, CQ HealthBeat Associate Editor

January 10, 2008 -- The Medicare Payment Advisory Commission (MedPAC) Thursday approved two recommendations concerning skilled nursing facilities and home health agencies. MedPAC then approved two others on long-term care hospitals and inpatient rehabilitation facilities that were revised from last month's draft recommendations in part due to provisions included in legislation signed into law in December that blocked a scheduled Medicare payment cut to physicians.

Consistent with a draft recommendation unveiled in December, commissioners voted to recommend that Congress freeze Medicare payment rates for skilled nursing facilities (SNFs) in fiscal 2009 at current levels, citing projected aggregate Medicare margins of 11.4 percent.

In addition, the panel approved a recommendation that Congress should establish a quality incentive payment policy for SNFs in Medicare and commissioners also approved a package of recommendations aimed at improving quality measurements for SNFs.

MedPAC Commissioner William J. Scanlon, who voted against the recommendation to establish a quality incentive payment policy for SNFs in Medicare, said it was not yet the right time for Congress to create a national "pay-for-performance" program for the facilities. He stated that more testing of the concept was needed before implementation, perhaps through a current Centers for Medicare and Medicaid Services (CMS) demonstration project. "When government does something and it turns out to be wrong, it's very hard to reverse it," Scanlon said.

In a statement, the Alliance for Quality Nursing Home Care called MedPAC's assessment of the industry "flawed and far off the mark," adding that the recommendation does not address shortfalls in Medicaid payments. "MedPAC gives Congress and the public a flawed basis on which to determine the best policy for America's seniors and the workers who provide their care," Alliance President Alan G. Rosenbloom said in a statement.

During Thursday's meeting the panel also approved a recommendation that Congress freeze 2009 payments to home health agencies at 2008 rates.

According to MedPAC, the recommendation would result in no major implications for beneficiaries and providers and would decrease federal spending by $250 million to $750 million in 2009 and between $1.5 billion and $5 billion over the next five years.

"Even a freeze seems to result in an extraordinarily generous payment level," said commissioner Jack Ebeler, who at the panel's December meeting suggested that MedPAC discuss a five percent reduction to home health agencies due to their profit margins, projected to hit an estimated 11.4 percent in 2008.

Two other payment recommendations the panel approved were modified from their December draft recommendations in part due to provisions included in legislation (PL 110-173) Congress approved and President Bush signed into law to extend funding for SCHIP and temporarily stop a scheduled cut in Medicare payment rates for physicians. MedPAC voted to recommend that the payment update for inpatient rehabilitation facilities (IRFs) be eliminated for fiscal 2009, a change from a draft recommendation in December that would have increased Medicare's payment rate for the sector by one percent.

Provisions in the Medicare/SCHIP law that affected the MedPAC draft recommendation include that the new law eliminates payment updates for IRFs in fiscal 2008 and 2009 and changes classification criteria for the facilities, rolling back the "75 percent" rule to permanently freeze at 60 percent the proportion of patients that must fall into certain medical categories for facilities to control quality for inpatient rehabilitation payments. The agreement also would permit co-morbid conditions to count toward the threshold.

At Thursday's meeting the panel also modified a December draft recommendation dealing with long-term acute care hospitals, which treat medically complex cases. The draft recommendation would have frozen 2009 payments at 2008 levels. The draft recommends that secretary for the Department of Health and Human Services update rates in 2009 for the facilities, known as LTCHs, by the projected rate of increase in the rehabilitation, psychiatric and long-term care hospital market basket rate less the commission's adjustment for productivity growth, which would result in an estimated 1.6 percent increase in Medicare payment rates.

The recommendation is expected to decrease federal spending by less than $1 billion over five years with no adverse impact on beneficiaries or providers.

Among its provisions, the Medicare/SCHIP measure changes the definition of LTCHs to require a patient screening process, on-site physician availability and consulting physicians and interdisciplinary treatment teams. The new law also rolls back for three years a CMS regulation proposed last January to extend the so-called 25 percent rule to virtually all LTCHs for which more than 25 percent of their discharged patients were admitted from an individual hospital, regardless of whether that hospital was located in the general vicinity of the LTCH.

At the time, CMS said hospitals have been building nearby LTCHs to get around the "25 percent rule," but that their proposal would close that loophole.

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