Grim Outlook for Medicare Funding Means SNFs Should Prepare Now

Posted by CC Andrews

Aug 5, 2016 10:49:16 AM

Physicians and skilled nursing facilities (SNFs) may be facing a Brexit of their own as to whether they will continue receiving Medicare paymeCherry_Pie_for_QA_Blog_Aug_5.jpgnts, according to the latest troubling results from the program’s trustees report. Published two months ago, the report was mostly ignored in the news cycle as the world focused on the fallout from the United Kingdom voting to exit the European Union (aka the Brexit vote).

According to the report, an aging population and longer-living enrollees are increasing per-enrollee healthcare costs that will not keep pace with the program’s funding sources. The trustees are calling on policymakers to act with urgency to shore up this essential program, stating that “such legislation should be enacted sooner rather than later to minimize the impact on beneficiaries, providers, and taxpayers.”

Although physician payment updates and new incentives established by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) led to more significant physician payment issues than would have resulted from the sustainable growth rate (SGR) approach, these additional payments are scheduled to expire in 2025. In their report, the Trustees anticipate that the physician payment rates will be lower than they would have been under the SGR formula by 2048. If subsequent legislation is not passed to correct the problem, the Trustees anticipate that “the availability and quality of health care received by Medicare beneficiaries would, under current law, fall over time compared to that received by those with private health insurance.”

According to a Medscape Medical News survey, four of 10 physicians in solo or small group practices say the new MACRA payment system will lead to many physicians dropping out as Medicare providers because of what the survey notes as “punishing penalties.”

Furthermore, the Trustees predict that the depletion date for the Hospital Insurance (HI) Trust fund of Medicare—known as Medicare Part A and helps pay for SNFs—is 2028, two years earlier than in last year’s report.

For the past five years, the Centers for Medicare & Medicaid Services (CMS) Chief Actuary Richard Foster reported that MACRA’s Medicare provider payment cuts would make hospitals and other Medicare Part A healthcare providers unprofitable and “jeopardize” seniors’ access to care. The report states that Foster claims “by 2040, simulations suggest that approximately half of hospitals, 70 percent of SNFs, and 90 percent of home health agencies would have negative total facility margins, raising the possibility of access and quality of care issues for Medicare beneficiaries.”

So what can SNFs do to preserve their profits if they chose to stay with Medicare? They can embrace alternative payment options such as bundling models, the virtues of which are discussed in a previous post.

SNFs should also prepare for CMS’ value-based purchasing model, which will commence in October 2018 with the SNF Readmissions Measure (SNFRM). The SNFRM is an all-cause rehospitalization measure, which means that any admission directly to a hospital from a SNF will count regardless of why it happened. Readmissions will be tracked within 30 days of discharge “from a prior proximal hospitalization.” Part A rates will then be cut (or not) at up to 2 percent for one year, based on a SNF’s rehospitalization scores.

Although the model does not take effect until 2018, CMS will look at rehospitalizations beginning this January until December 2017. There are myriad resources and tools available to SNF providers to help reduce hospital readmissions. Taking advantage of them may be one of the most important things a SNF can do to prepare for the coming Medicare payment reduction storm.

In addition, MedPAC proposed to Congress an alternative payment concept in a March 2016 report that calls for a unified PAC prospective payment system to replace the current fee-for-service system. A similar SNF-bundled PAC payment legislation is being advocated by the American Health Care Association, which claims that Medicare would receive $1 billion in expected savings over the next 10 years.

Medicare funding may be dwindling faster than expected, but preparation now is key. Embracing alternative payment models, reducing hospital readmissions, and embracing the longevity economy should be high priorities if you want to claim a piece of shrinking Medicare pie.

For insights on how you can tap into the longevity economy, engage with Quantum Age today.

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Topics: long-term and post-acute care, bundled payments, Medicare

Bundled Payments & Post-Acute Care

Posted by CC Andrews

Jul 11, 2016 10:08:10 AM

Bundled payments are here to stay—at least that’s the conclusion one may come to given some recent analyses of the topic. And if the powers that be at CMS read the latest Harvard Business Review, they would find some compelling arguments for making bundled payments a permanent fixture in the agency’s efforts to move Medicare into alternative payment models.bundled_payment_photo-1447069387593-a5de0862481e.jpeg

The article, “How to Pay for Health Care,” was particularly helpful in explaining why this model could be very successful in achieving the triple aim the agency aspires to. Authored by noted Harvard Professors Michael Porter and Robert Kaplan, the article offers some persuasive opinions about the potential that bundled payment models have in improving health care, reducing costs, and providing individualized care.

Within the context of long-term and post-acute care, there are two demonstrations under way that impact providers: the Comprehensive Care for Joint Replacement (CJR) model and the Bundled Payments for Care Improvement (BPCI) initiative.

In a bundled payment model providers are paid for the care of a patient’s entire care cycle—such as all services, procedures, tests, drugs, and devices used to treat a patient with a condition such as heart failure or a hip replacement, for example. 

Bundled payments represent one component of CMS’ effort to boost value-based reimbursement, with capitation being the other. But Porter and Kaplan note that under capitation a provider must meet all the needs of a patient population with a fixed payment (per year, per covered life).

As the authors compare and contrast capitation and bundled payments, they are convinced that the solution to improving individualized health care and creating efficiencies will come with the latter. They liken bundled payments to a consumer’s experience purchasing products and services, where a single price is paid for a whole package that meets their needs—such as a car. With the purchase of a car, they argue, the consumer does not buy the motor from one supplier and the brakes from another—they buy a complete product from a single entity.

Bundled payments, they say, simply “draw on an approach long used in virtually every other industry.”

Among the arguments made against capitation is that it creates competition at the wrong level and on the wrong things, “rather than on what really matters to patients and to the healthcare system overall,” the authors state, noting that this is similar to how FFS models have traditionally worked. “Capitation rewards improvement at population level but not at individual level.” It is also not aligned with better or efficient care for each patient’s particular condition.

Another downside to capitation models: The risk factors are complex, which leads to an incentive for health systems to claim as many comorbidities as possible to bolster their revenue and profitability, they contend.

Porter and Kaplan conclude that capitation is wrong because it is a “top-down approach that achieves some cost savings by targeting low-hanging fruit such as readmission rates, expensive drugs, and better management of post-acute care.” The problem with this, they add, is that it doesn’t change how health care is delivered and neither does it hold providers accountable for efficiency and outcomes when it comes to patients and the treatment of their conditions. In short, it restricts patient choice and inhibits provider competition.

A recent analysis by consulting firm Avalere Health asserts that the increase in bundled payment models will impact LTPAC providers in several ways. Among them, will be fewer FFS patients, shorter lengths of stay, fewer readmissions, and a decreased use of costly settings

Avalere also has some predictions about bundled payments for the coming year and beyond: a reopening of the BPCI demonstration for new participants, a potential for new models, and an expansion of mandatory bundles like CJR.

Porter and Kaplan also state that bundled payments “will be the catalyst that finally motivates provider teams to work together to understand the actual costs of each step in the entire care process, learn how to do things better, and get care right the first time.”

These arguments could have a significant impact on healthcare delivery and LTPAC in particular. It’s worth the read. 

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Topics: long-term and post-acute care, bundled payments, Medicare