On Dec. 15, the Medicare Payment Advisory Commission (MedPAC) discussed draft recommendations to Congress that would freeze skilled nursing and home health payment updates for 2013.
The draft recommendation for 2013 updates for nursing home payment includes eliminating the market basket and directing the Secretary to revise the prospective payment system (PPS). The draft recommendation also included rebasing beginning in 2014, with an initial reduction of 4% and subsequent reductions “over an appropriate transition until Medicare payments are better aligned with provider costs”.
The commission also considered a draft recommendation to design a rehospitalization policy that would reduce payment to SNFs with high risk-adjusted rehospitalization rates for their Medicare covered SNF days.
On average MedPAC staff found that for-profit nursing homes have rehospitalization rates that are 25% higher than non-profits. MedPAC staff reported that the average Medicare margins for nursing homes in 2010 was 18.5%, with considerable variation ranging from 9.5% for non-profit homes to 26.6% for for-profit homes.
This variation is partly due to the mix of cases these different facilities treat and cost differences (non-profit facilities have cost per day that are 7% higher costs than for profit facilities). MedPAC staff reported that the projected nursing home average margins for 2012 is 14.6% even with the 11% cuts experienced in 2011.
For home health agencies, MedPAC considered the same recommendations they proposed last year, including revising the home health prospective payment system to eliminate financial incentives that encourage more therapy and replacing it with a system based on patient characteristics. MedPAC also discussed rebasing the payment levels to equal costs beginning in 2013 (with a 2-year transition).
MedPAC staff expressed concern that the 2010 financial performance of freestanding home health agencies continued to be excessive, with margins for for-profits agencies at 20.7% and for non-profit agencies at 15.3%. The average projected margin for home health agencies in 2012 is 13.7%.
MedPAC as a whole will have to vote at its next meeting on whether to send these recommendations to Congress. The recommendations will not go into effect unless and until they are legislated by Congress.
Under the terms of the Affordable Care Act, skilled nursing facilities are due to get a reimbursement adjustment in fiscal 2013 based on the increase in the market basket minus a yet-to-be determined factor based on the increase in productivity in the nation’s economy. For calendar year 2012, Medicare payments to home health agencies are estimated to decrease by approximately 2.31 percent or $430 million, the net effect of a 1.4 percent payement update, the wage index update and a 3.79 percent case-mix coding adjustment.