Senate Finance Committee Proposals Would Impact Long-Term Care Providers

May 20, 2009

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 surgeries).

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 implemented.

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 maintained.

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 policy?
  • 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, 2009.

Please contact the authors for additional information or a member of McGuireWoods’ Long-Term Care practice group.