The Senate Finance Committee has recently released three “health reform
option papers” exploring proposals for reducing costs and improving quality and
efficiency in the country’s health care delivery system. The
first option paper, released on April 29, 2009, contains a number of
proposals that, if enacted, would significantly affect Medicare payments to
long-term acute care hospitals (LTACH), skilled nursing facilities, home health
providers, and rehabilitation facilities. Some of these proposals, and the
questions that they present, are discussed in greater detail below.
1. Reducing Preventable Hospital Readmissions
The option paper contains a proposal for reducing preventable hospital
readmissions and establishing payment incentives intended to improve patient
care. Starting in fiscal year (FY) 2010, CMS would begin calculating national
and hospital-specific readmission rate data for short-term acute-care hospitals
to determine the eight conditions with the highest volume and rates of
readmission. In FY 2011, CMS would inform hospitals of their readmission rates
in relation to a national readmission rate benchmark for each of the selected
conditions. The readmission rate benchmark would include all readmissions that
are the result of complications or related conditions, but would exclude
readmissions that are not potentially preventable (i.e., planned readmissions or
readmissions related to cancer care, burn care, trauma care, and scheduled
In FY 2013, short-term acute-care hospitals with readmission rates above the
75th percentile for selected conditions would be subject to a payment withhold.
Such a withhold would be based on the prior year’s performance and would be
equal to 20% of the MS-DRG payment amount. The readmissions policy would not
apply to conditions included in the bundled payment discussed below, and the
readmissions policy would expire once the bundled payment policy is fully
2. Payment Bundling
The option paper contains a proposal to bundle payment for short-term
acute-care hospital services and post-acute care provider services occurring or
initiated within thirty days of discharge from a short-term acute hospital
beginning in FY 2015. Under this proposal, post-acute bundled payments would be
made for LTACH, home health, skilled nursing, and rehabilitation services.
Short-term acute-care hospitals or other eligible entities would receive the
bundled payment for each patient, regardless of whether the patient receives
post-acute care services. No additional payments would be made to the hospital
or organizing provider for readmissions during this timeframe and Medicare would
no longer make separate payments to post-acute care providers for care initiated
within thirty days post-discharge.
The bundled payments would be implemented in three phases. Phase one would be
implemented in FY 2015 and would apply to admissions for conditions that account
for the top 20% of post-acute care spending. Phase two would be implemented in
FY 2017 and would apply to admissions for conditions that would account for the
next 30% of post-acute care spending. Starting in FY 2019, the final phase of
bundling would be implemented and would include all other conditions and MS-DRGs
that account for the remaining 50% of post-acute care spending. CMS would be
permitted to waive applicable laws, as appropriate, under the proposal to
implement these policies and to develop patient protection rules to ensure that
patients receive appropriate post-acute care and that access to care is
3. Quality Reporting
The option paper proposed that CMS would be required to select quality
measures for LTACHs and inpatient rehabilitation facilities (IRFs) by 2011 and
implement mandatory quality measure reporting programs by 2012. Selected
measures would be endorsed by a consensus-based entity under contract with CMS,
and would cover, to the extent feasible, all dimensions of quality and
efficiency of care.
4. Value-Based Purchasing and Information Technology
The option paper contains preliminary proposals for developing value-based
purchasing programs for LTACHs, IRFs, skilled nursing facilities, and home
health providers, and extending the Health Information Technology incentives
provided to short-term acute-care hospitals under the American Recovery and
Reinvestment Act to post-acute care providers.
5. Unanswered Questions
The option paper raised a number of questions from National Association of
Long Term Hospital (NALTH) conference attendees during the organization’s 2009
Annual Meeting in Washington, D.C. including:
- If the proposed bundled payment policy is only
intended to curb preventable readmissions within the first thirty days after
discharge from a short-term acute care hospital, how would post-acute care
providers be paid beginning on the thirty-first day after discharge?
- What laws (e.g., Stark and Federal
Anti-Kickback), if any, would CMS waive to implement the new bundled payment
- How would the proposal ensure that post-acute
care providers are not penalized for patient non-compliance that could be
misconstrued as a preventable readmission?
Neleen Eisinger, one of Senator Max Baucus’ congressional staffers who was
instrumental in drafting the option paper, addressed NALTH conference members
and emphasized that these are issues that the Committee hopes the post-acute
care industry will raise and to which the industry should propose solutions.
Comments to the option paper were due to the Senate Finance Committee by May 15,
Please contact the authors for additional information or a member
Long-Term Care practice group.