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 Government Report Stokes Debate on Certificate of Need, Unified Payment Issues

A new report issued in part by the Departments of Health and Human Services (HHS), Labor, and Treasury examined the ways in which government policies at all levels influence choice and competition in the U.S. health care system and made suggested changes that could affect long term and post-acute care providers if eventually acted on by Congress.

Specifically, within the voluminous analysis, report authors said site-neutral payment should be implemented to generate cost savings and efficiencies in the Medicare program, a topic that has gained in prominence among post-acute care (PAC) providers in recent months.

The report also offered criticism of state “certificate-of-need (CON)” laws, which require providers to obtain permission from a state to build new facilities, expand existing ones, or offer other certain health care services. In the HHS-led report, CON laws are cited as being “cost barriers to entry” for providers and as “interfering with market forces that normally determine the supply of facilities and services.”

In response, Mark Parkinson, president and chief executive officer of the American Health Care Association/National Center for Assisted Living (AHCA/NCAL), says the discussion on CON laws should be for the states to decide.

“There is no reason for the federal government to impose a one-size, fits-all solution, when every state is different,” he tells Provider. “In addition, in light of building closures, financial strain, and the historic occupancy decline that skilled nursing is facing, it makes no sense to promote policies that will make that condition even worse.”

The report, “Reforming America’s Healthcare System Through Choice and Competition,” dedicated much space to the Affordable Care Act, health insurance, and other segments of the health care system. But, in addition to CON laws, it focused on payment structures in government-reimbursed programs, like Medicare.

Noting that the current Medicare fee-for-service (FFS) reimbursement model is “often based predominately on the setting of care and not the patient’s underlying medical need,” the report said this “can create incentives for providers to refer patients selectively to more highly reimbursed care settings, unjustifiably increasing concentration and spending.”

As one example, the report looked at PAC and the way in which home health agencies (HHAs), skilled nursing facilities (SNFs), inpatient rehabilitation facilities (IRFs), and long term care hospitals (LTCHs) are paid under separate prospective payment systems (PPS).

“Base PPS payments for each of these settings differs considerably, even though the clinical characteristics of patients and the services delivered at any of the four PAC settings may be similar,” the report said.

For example, 2018 base PAC PPS payments (that is, base payments prior to adjustments such as case mix) are roughly $15,000 per discharge for IRF, about $400 per diem for SNF (up to 100 days in a covered spell of illness), about $3,000 per 60-day episode for an HHA, and about $41,000 per discharge for a standard LTCH stay.

Reflecting the development of a unified PAC system at the Medicare Payment Advisory Commission (MedPAC), the new report said such a site-neutral PAC PPS would base Medicare payment on the clinical characteristics of the patient instead of the provider setting.  

The report recommends that Congress establish site-neutral payment policies based on the clinical needs and risk factors of the patient, not the site of service. In delivering these reforms, Congress should account for differing levels of patient acuity, the report said.

In addition, the report said state Medicaid programs “should embrace site neutrality as a goal and reform their payment systems to pay for the value delivered where value is defined according to a relatively limited, straightforward, and non-gameable set of metrics. Additionally, metrics should not be designed and

In response to the statements on PAC payment, Mike Cheek, senior vice president of reimbursement policy for AHCA/NCAL, says the association has supported payment transformation that ensures adequate and appropriate payment for Medicare-financed PAC services. 

“We have expressed interest in some of the payment policy features in MedPAC’s concept for a unified PAC payment system, including payment by stay and companion policies to address patients with intense needs who might benefit from a high-cost outlier policy and patients who might need more intense services but for a shorter length of stay,” he says. “These patients likely would be best supported by a short-stay policy.” 

Cheek adds that AHCA/NCAL looks forward to the HHS report in response to the MedPAC concept. 

Read the full report at: https://home.treasury.gov/news/press-releases/sm564.

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