A panel of Medicare advisors decided that a future unified payment system for post-acute care facilities should be based on each individual patient stay and not for the entire episode of care.
The Medicare Payment Advisory Commission on Friday discussed how to proceed on creating a unified prospective payment system to improve the accuracy of Medicare fee-for-service payments for post-acute care settings. While commission members were encouraged about an episode-based system, the idea was scuttled after concerns about whether post-acute care facilities would discharge patients too soon under the system.
"At this point we should be going with a stay-based model," said Paul Ginsburg, head of the Center for Health Policy at the Brookings Institution.
But commission members said that they would like to revisit episode-based payments in the future.
"An episode-based approach has some real value in creating a different incentive in the system," said Kathy Buto, an independent consultant.
Buto suggested that the CMS could create episode-based Medicare bundles that could generate savings in the post-acute area.
A report from MedPAC staff outlined the pros and cons of doing an episode-based approach compared to a stay-based approach.
Currently Medicare fee-for-service has separate payment systems for each post-acute setting. This has cause vast differences in the amounts of payments for post-acute care.
In 2016, spending in Medicare's fee-for-service program for post-acute care was $60 billion. Congress mandated that MedPAC look into creating a unified post-acute care prospective payment system that would pay the same risk-adjusted rate for care regardless of the setting.
Medicare's fee-for-service system reimburses for post-acute care in four settings: home health, skilled nursing facility, inpatient rehabilitation facility and long-term care hospital.
But commission members speculated whether to tie payments under this system to the entire episode of care or for each patient stay. A key concern was to lower the amount of transitions, or handoffs, that a patient has to make during post-acute care.
"We noted that a stay-based payment system does little to dampen fee-for-service," said MedPAC staff member Carol Carter in a presentation before the panel on Friday.
Under an episode-based system, one fixed payment would be made for the combination of stays that a patient would make throughout an episode of post-acute care.
The payment would be based on the length of the stay, with longer stays getting a higher payment than shorter stays.
However, commission staff found that episode-based payments had their own downsides.
A major downside is that a post-acute care facility will get less money for a longer episode than a shorter one because of the extended costs of care.
"Our analysis indicated that an episode-based payment design would create an incentive for providers to furnish shorter episodes over longer ones," Carter said. "If past industry behavior is any guide, the large differences in profitability could influence provider behavior."
MedPAC's report added that an episode-based design could result in premature discharges to also avoid long stays.
Healthcare providers would also avoid patients who are likely to need extended care, the report said.
The CMS has pushed for episode of care reimbursements for healthcare providers. In October, the agency started a bundled payment voluntary program that pays a provider a fixed price for the episode of care. The voluntary demonstration runs through 2023.