On March 13, 2015, the Medicare Payment Advisory Commission (MedPAC) issued its annual report to the Congress on Medicare payment policies (Report).  The Report includes recommendations for inflation updates and payment policies for nine Medicare payments systems for 2016. 

MedPAC’s recommendations include, among others:

Long-Term Care Hospitals (LTCHs)

MedPAC explains that payment rates differ for similar patients in acute care hospitals and LTCHs, and that LTCHs are currently paid significantly higher rates than acute care hospitals.  Accordingly, MedPAC recommends a new criterion for patients receiving higher level LTCH payments.  Specifically, MedPAC recommends that chronically critically ill (CCI) patients (defined as those who spent eight or more days in an intensive care unit during an immediately preceding acute care hospital stay) should continue to qualify for the relatively high LTCH payment rates.  However, under MedPAC’s recommendation, non-CCI patients at LTCHs would receive inpatient prospective payment system (IPPS) standard payment rates.  MedPAC further explains that the reduction in LTCH rates for non-CCI cases would generate savings that would be transferred to acute care hospitals in the form of higher outlier payments for the most costly CCI cases. 

Site-Neutral Payments for IRFs and SNFs

MedPAC recommends site-neutral payments for certain conditions between two post-acute care sectors: skilled nursing facilities (SNFs) and inpatient rehabilitation facilities (IRFs).  MedPAC explains that this recommendation “builds on [its] past recommendations for site-neutral payments between hospital outpatient departments and physicians’ offices for certain services, and for consistent payment between acute care hospitals and long-term care hospitals for certain classes of patients.”  MedPAC further explains that “site-neutral payments that base the payment rate on the less costly sector can save money for Medicare, reduce cost sharing for beneficiaries, and reduce the incentive to provide services in the higher paid sector, without compromising beneficiary access to care or health outcomes.”  MedPAC recommends that the reductions to IRF payments be phased in over three years.

Primary Care Incentive Payment Program

Medicare’s Primary Care Incentive Payment Program (PCIP) is set to expire at the end of 2015.  The PCIP provides a 10 percent bonus payment on fee schedule payments for primary care services provided by eligible primary care practitioners.  While MedPAC recommends that the additional payments to primary care practitioners continue, it also recommends that the additional payments be in the form of a per-beneficiary payment.  MedPAC suggests this would be a step away from the fee-for-service payment approach and toward beneficiary-centered payments that encourage care coordination.

The MedPAC Report is available by clicking here.

Reporter, Stephanie F. Johnson, Atlanta, (404) 572-4629, sfjohnson@kslaw.com.

OIG Identifies Top 25 Unimplemented Recommendations – The HHS Office of Inspector General (OIG) recently released its March 2015 edition of the OIG Compendium of Unimplemented Recommendations (Compendium).  The Compendium identifies the 25 highest-priority OIG recommendations that have not yet been implemented by HHS.  According to the OIG, HHS should prioritize the implementation of these recommendations because of the significant cost savings and/or quality improvement that would result. 

The recommendations identified were contained in previous OIG reports but have not yet been implemented due to various reasons.  For several of the recommendations, HHS disagreed with the recommendation when issued.  Additionally, as the OIG recognizes, HHS lacks the authority to pursue several of the recommendations because the implementation would require legislative action.  However, in those cases, the OIG notes that HHS can make recommendations to Congress, and Congress has previously incorporated such recommendations into legislative actions. 

The top 25 recommendations identified in the Compendium include, among others:

• Reducing hospital outpatient department payment rates for procedures approved for ambulatory surgical centers (ASCs) – The OIG notes that Medicare pays more for certain procedures performed in hospital outpatient departments that could have been safely performed in an ASC setting.  Accordingly, the OIG urges HHS to seek legislation that would reduce the payment rates to hospitals for certain procedures performed in an outpatient department when the procedure could have been safely performed in an ASC.   The OIG estimates the savings from implementing this recommendation to be approximately $15 billion.  The OIG initially issued this recommendation in April 2014, but CMS disagreed with the recommendation noting that the recommendation may raise “circularity concerns” because most ASC payment rates are based on the outpatient hospital payment rates.  Additionally, CMS stated the change would require legislative changes that are not currently included in the President’s budget.
   
• Expanding the Diagnosis Related Group (DRG) window – The DRG window determines when outpatient services related to inpatient admissions are included in the DRG lump-sum payment.  Under the current DRG window, Medicare does not separately reimburse related outpatient services delivered within three days of an inpatient admission in a setting owned by the admitting hospital.  The OIG recommends expanding this window beyond three days and also including services provided at hospitals sharing a common owner, such as affiliated hospitals.  The OIG estimates savings of approximately $308 million if this recommendation is implemented.
   
• Establishing a transfer payment policy for early discharges to hospice care –  In May 2013, the OIG recommended that CMS establish a transfer payment policy for early discharges to hospice care.  The OIG notes that, while hospital payments are reduced for early discharges where the patient is transferred to another hospital or to a post-acute care facility, there is currently no such policy for early discharges to hospice settings.  Accordingly, the OIG recommends that CMS treat early discharges to hospice like early discharges to other care settings.  The OIG estimates this measure would save approximately $602.5 million.

To view the Compendium, click here.

Reporter, Isabella Edmundson, Atlanta, GA, + 1 404 572 3527, iedmundson@kslaw.com