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 MedPAC Releases March Report, Urges Revised SNF Payment System

In its March 2018 Report to the Congress: Medicare Payment Policy, the Medicare Payment Advisory Commission (MedPAC) stuck to its previous policy mantra in urging Congress to make changes to the way skilled nursing facilities (SNFs) are reimbursed as early as next year under a revamped prospective payment system.

The report to lawmakers, which is one of two formal sets of proposals the commission produces annually (the other in June), included not only recommendations for SNF payment, but MedPAC’s broader analyses of payment adequacy in fee-for-service (FFS) Medicare and reviews of the status of Medicare Advantage (MA) and the prescription drug benefit, Part D.

“MedPAC also proposes changing the way Medicare pays for clinician services in FFS by moving beyond the Merit-based Incentive Payment System, recommends changes to MA and Part D to improve the equity and efficiency of those programs, and responds to a congressional mandate on telehealth in Medicare,” the commission said.

For long term and post-acute care providers, the highlights of the report, which Congress is not obligated to act on, include the commission recommending that for fiscal year 2019 (FY19) Congress should “eliminate the market basket update for SNFs for fiscal years 2019 and 2020 and direct the secretary [of Health and Human Services] to implement a redesigned prospective payment system (PPS) in fiscal year 2019 for SNFs.” The commission also said Congress should “direct the secretary to report to the Congress on the impacts of the revised PPS and make any additional adjustments to payments needed to more closely align payments with costs in fiscal year 2021.”

These policies did not stray from MedPAC’s work in recent months to refine its well-established beliefs on the need to change the current reimbursement model for SNFs.

On SNF Medicare margins, MedPAC said that in 2016, the average for freestanding SNFs was 11.4 percent, but noted that the projected FY18 margin is 9 percent. The expected decline is the result of the market basket update being offset by the productivity adjustment in 2017, the Medicare Access and CHIP Reauthorization Act (MACRA)-mandated update in 2018, and the program savings from value-based purchasing.

MedPAC also issued data on Medicaid use, spending, and non-Medicare (private-payer and Medicaid) margins. According to the commission, the number of Medicaid-certified facilities has declined slightly since 2015, less than 0.5 percent, but remains close to 15,000. Total FFS spending on SNF services dropped 3.2 percent between 2015 and 2016, and a smaller decline (minus 1.6 percent) is predicted between 2016 and 2017, according to data from the Centers for Medicare & Medicaid Services (CMS) in MedPAC’s report.

In 2016, MedPAC said the average total SNF margin was 0.7 percent, less than 1 percent. This figure includes all payers (managed care, Medicaid, Medicare, and private insurers) and all lines of business (hospice, ancillary services, home health care, and investment income). The 2016 margin is down from 1.6 percent in 2015.

The average non-Medicare margin (which includes all payers and all lines of business except Medicare FFS SNF services) was minus 2.3 percent, also lower than the minus 2.1 percent seen for 2015.

Moving to other issues, MedPAC said it remains supportive of the Resident Classification System Version 1 (RCS-1) and urged quick implementation. “The [RCS] design is consistent with the design recommended by the commission in 2008, and the estimated impacts would be similar,” the report said.

The design, MedPAC said, would redistribute payments from rehabilitation patients (especially those assigned to the highest rehabilitation case-mix groups) to medical patients, patients with high NTA (non-therapy ancillary) costs, and patients requiring extensive services or wound care. “Reflecting the mix of patients, payments would shift from freestanding to hospital-based providers and from for-profit to nonprofit providers.”

On admissions data, MedPAC said between 2015 and 2016, SNF admissions per FFS beneficiary declined 3.6 percent. In calculating these numbers, MedPAC only examines FFS beneficiaries because CMS data on users, days, and admissions do not include service use by those in MA plans.

Covered days per 1,000 FFS beneficiaries declined even more (minus 6.5 percent). And, the report said the combination of decreased SNF admissions and even sharper declines in days resulted in shorter stays on average (25.7 days in 2016).

MedPAC said the admissions and lengths of stay trends reflect a growing presence of alternative payment models like accountable care organizations and bundled payments. “There is some evidence that providers participating in alternative payment models refer fewer patients to PAC [post-acute care, including SNF] and that their SNF use includes shorter and less therapy-intensive stays.”

For the full report, visit

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