The Medicare Payment Advisory Commission (“MedPAC”) met in Washington, D.C., on September 6-7, 2018. The purpose of this and other public meetings of MedPAC is for the commissioners to analyze existing challenges and issues within the Medicare program and to provide future policy recommendations to Congress. MedPAC issues these recommendations in two annual reports, one in March and another in June. These meetings offer a comprehensive perspective on the current state of Medicare as well as future outlooks for the program.

As thought leaders in healthcare law, Epstein Becker Green monitors MedPAC developments to determine how regulations and policies will impact the health care marketplace. Here are our five biggest takeaways from the September meeting:

  1. MedPAC Discusses Trends in the Growth of Medicare and Total Healthcare Spending

MedPAC examined recent growth trends in Medicare and total healthcare spending in order to determine the budgetary impact of its recommendations. As part of their analysis, MedPAC reviewed the effects of healthcare spending on Medicare beneficiaries, households, and federal and state budgets as well as discussed evidence on ineffective spending and the opportunities it presents to lower health care spending without adversely impacting health outcomes.

MedPAC projects that the Medicare program will nearly double in size over the next decade, rising from “about $700 billion in total spending to 2017 to $1.3 trillion 2026.” At the same time, MedPAC expects that Medicare’s financing will become increasingly strained. Indeed, MedPAC projects that Medicare spending could rise from roughly 3 percent of our economy today to about 6 percent by 2048. The Commission estimates that Medicare, Medicaid, Social Security, and other major health program spending as well as net interest will reach nearly 20 percent of the economy and exceed total federal revenues by themselves.

Finally, the Commission found that Medicare may face a number of challenges in achieving savings down the road. The Commission points to Medicare’s fragmented payment systems across multiple health care settings, which the Commission believes contributes to a reduction in incentives to provide patient-centered coordinated care. Furthermore, Medicare’s benefit design is comprised of several parts, each of which cover different services and require different levels of cost sharing.

  1. MedPAC Provides Recommendations to Revise Statutory and Regulatory Requirements for PAC Providers

MedPAC presented recommendations for adopting a more unified payment system as well as ideas for creating common requirements for all Post-Acute Care (“PAC”) providers that would align the proposed system goals. The current system is comprised of four prospective payment systems (“PPS”). MedPAC’s concerns with the existing system is relative to differences in statutory and regulatory requirements for each. MedPAC found the requirements to be quite different across the four PPS settings while relatively similar in other cases. MedPAC also referenced other differences among PPSs relative to setting-specific and nursing requirements as well as Inpatient Rehabilitation Facilities (“IRF”) and Long-term Care Hospitals (“LTCH”). MedPAC’s theory rested on the idea that a unified PAC PPS would determine payments based “solely on patient characteristics and minimize the role of site of care in setting payments.”

MedPAC proposed establishing new requirements that could establish “separate categories to acknowledge that delivering care in the institution has some responsibilities that care in the home does not have . . . .” The proposed requirements were split into two tiers: (1) the first tier forming general requirements for services necessary to serve the majority of Medicare PAC patients and (2) the second tier for patients requiring more specialized care. Altogether, MedPAC believed that such a system could enhance the possibility of creating a more cohesive, unified payment system that could best determine patient payments.

  1. MedPAC Expresses Concerns Regarding Spending and Utilization of Long-term Care Hospitals

Congress mandated MedPAC to examine the effect of the LTCH dual-payment policy on the following issues:

  • The quality of care provided in long-term hospitals
  • The use of hospice care and post-acute-care settings
  • The effect on different types of LTCH, and
  • The growth in Medicare spending for services in LTCHs

MedPAC expressed concerns relative to LTCH spending and use over the past two decades as more than one LTCH would be located in one region of the country whereas some areas had none. Further concerns focused on research findings that failed to show a clear advantage in terms of outcomes or episode spending for LTCH users compared to those who used other PAC provider types. LTCHs are quite expensive—total Medicare spending totaled “just over $5.1 billion for about 126,000 cases in 2016.” Thus, due to the high expenses and unclear health outcome advantage of LTCHs, MedPAC suggested Medicare payers should better define the appropriate patients for LTCH care.

The Commission also expressed concerns relative to the growth of LTCHs. Though spending began to decrease after 2012, CMS never fully implemented policies to set limits on the share of cases being admitted to LTCHs from single referring acute-care hospitals. Thus, MedPAC is concerned as to whether the most appropriate patients are receiving care in LTCHs given that policymakers have failed to define this class of patients.

MedPAC plans to analyze new measures to determine quality of care in LTCHs, the use of hospice and other post-acute-care settings, use and spending data across different types of LTCHs, and the impact of the elimination of threshold policies in order to address these issues.

  1. MedPAC begins review of Medicare clinician payment updates under MACRA mandate

In 2015, the Medicare Access and CHIP Reauthorization Act (“MACRA”) repealed the sustainable growth rate formula for Medicare clinician fees and created permanent statutory updates for such fees. MACRA required MedPAC to conduct a report on clinician payment that reviews these updates and considers their impact on four indicators: (1) the efficiency and economy of care, (2) supply, (3) access, and (4) quality.

MedPAC first examined the efficiency and economy of care by analyzing Medicare spending trends. It identified the payment updates as affecting Medicare spending—the payment updates apply to Medicare’s conversion factor for the clinician services fee schedule used by Medicare. However, MedPAC also acknowledged that other factors might impact spending in addition to the payment updates, including policy adjustments (e.g., converting payment incentive programs to penalty programs), site-of-service shifts (i.e., moving services from “the physician office setting to the hospital outpatient department” decreases Medicare physician fee schedule spending but still increases total Medicare spending), and clinician increases in volume and intensity of services provided.

MedPAC then reviewed the effect of the payment updates on supply, which it measured as the “number of clinicians billing Medicare.” It found that despite “relatively modest” payment updates (averaging about a half percent annually), supply has been steadily growing since 2009, from a 1.5% increase in specialty physicians billing Medicare per year to a robust 10.1% increase in advanced practice registered nurses and physician assistants billing per year.

In order to track access to care, MedPAC analyzed the results of its yearly telephone survey of Medicare beneficiaries and individuals with private insurance, closely tracking the ease of finding new primary care physicians as a key indicator of access to care. It found that “diverging payment rates” between Medicare and private insurance “have not appeared to have resulted in a difference in patient-reported access to care” based on MedPAC’s survey results.

Finally, MedPAC reviewed statutory updates and their impact on quality. MedPAC reported “little evidence” that higher payments translate to higher quality for clinician services. MedPAC also emphasized its recommendation to repeal Medicare’s current quality program for clinicians, the Merit-based Incentive Payment System (“MIPS”) since MIPS does not allow for comparison of quality performance across clinicians. Overall, MedPAC concluded that impact on quality is indeterminate.

MedPAC plans to revisit this review in the spring of 2019 with a presentation analyzing updated data and a “site-of-service adjusted volume analysis.”

  1. MedPAC reviews its new Hospital Value Incentive Program and requests feedback regarding quality measures and monitoring hospital-acquired conditions

MedPAC was tasked with the potential redesign of the hospital quality and value program, which currently involves four complex and overlapping quality payment and reporting programs. Based on quality incentive principles laid out by the Commission, MedPAC created the Hospital Value Incentive Program (“HVIP”). MedPAC reviewed the design of its new clear and focused HVIP:

Combined

  • Hospital Readmissions Reduction Program (“HRRP”) and
  • Hospital Value-based Purchasing Program (“VBP”)

Eliminated

  • Inpatient Quality Reporting Program (“IQRP”) and
  • Hospital-Acquired Condition Reduction Program (“HACRP”)

MedPAC described four outcome, patient experience, and cost measures of quality in the HVIP: (1) readmissions, (2) mortality, (3) spending, and (4) patient experience. MedPAC also asserted the following characteristics of its HVIP:

  • Translation of quality measure performance into payment by adhering to clear performance standards.
  • “Peer grouping” to account for provider population differences (“Peers” are those providers that “treat a similar share of fully dual-eligible beneficiaries”)
  • Redistribution of a budgeted amount based on the hospitals’ performance
  • Public reporting of quality results

MedPAC explained that its model of the HVIP projected a 50:50 reward-penalty ratio. The model weighted each of the four measures of quality equally when determining a HVIP “score” for the hospital, but MedPAC reasoned that policymakers could prioritize certain measures to appropriately balance the interests of Medicare and its beneficiaries. MedPAC then offered suggestions for changing the withhold amount to align to the budget neutral goal of the HVIP, instead of the current maximum 3% reward and 6% penalty assessed to hospitals. MedPAC discussed the “patient experience” measure, which it stated would be based on the Hospital Consumer Assessment of Healthcare Providers and Systems (“HCAHPS”) national survey, which consists of ten core measures. MedPAC explained two alternatives for incorporating this survey data: (1) using the overall HCAHPS score or (2) scoring multiple select individual HCAHPS measures. MedPAC did caution that several hospital quality leaders favored the single overall HCAHPS rating due to better avoidance of bias. MedPAC subsequently requested the Commission’s thoughts on patient experience data to be used in the HVIP.

Finally, MedPAC expressed hospital quality leaders’ concern over Medicare’s hospital-acquired conditions (“HAC”) reduction program and its connection to payment. MedPAC suggested removing these financial incentives associated with limiting HACs and instead continue public reporting of results and allow financial incentives indirectly through HVIP’s readmissions measure. MedPAC requested feedback from the Commission on this issue.

The Medicare Payment Advisory Commission (“MedPAC”) met in Washington, DC, on March 1-2, 2018. The purpose of this and other public meetings of MedPAC is for the commissioners to review the issues and challenges facing the Medicare program and then make policy recommendations to Congress. MedPAC issues these recommendations in two annual reports, one in March and another in June. MedPAC’s meetings can provide valuable insight into the state of Medicare, the direction of the program moving forward, and the content of MedPAC’s next report to Congress.

As thought leaders in health law, Epstein Becker Green monitors MedPAC developments to gauge the direction of the health care marketplace. Our five biggest takeaways from the March meeting are as follows:

  1. MedPAC gives an update on CMS’s financial alignment demonstration for dual-eligible beneficiaries

MedPAC provided an update to CMS’s demonstration for dual-eligible beneficiaries.  The purpose of the demonstration is to improve the quality of care in the dual-eligible program and reduce costs in both Medicare and Medicaid programs.  MedPAC briefly reported on the two demonstration models tested among 13 states: (1) Medicare-Medicaid Plans (“MMPs”) and (2) Managed Fee-for-Services (“FFS”).

For MMPs, the rates appeared to be adequate following a 2016 increase in the Part A/B rates (5-10%).  Enrollment has been lower than expected because many beneficiaries chose to either opt out before passive enrollment took effect or disenroll from their MMP.  Although overall participation rate was 29 percent of eligible participants, the total MMP enrollment has been stable since mid-2015.  Plan participation in MMPs has decreased.  Eighteen MMPs have left the demonstration largely because participation and enrollment were very low.  Regarding the effects of MMPs on service use, quality, and cost, CMS is still collecting reports and data.  However, MedPAC expects that the reports from the first and second year of the demonstration will provide little insight since implementing the demonstrations were challenging.  Some MMPs reported that it took 18 to 24 months before they could see changes in patterns of service use among their enrollees.

For Managed FFS, CMS estimated that there was a reduction in Medicare spending by $67 million during its first 2.5 years of operation in Washington state.  But MedPAC believed that the savings was inflated because the savings figure is based on an estimate of what Medicare would have otherwise spent on roughly 20,000 dual eligibles enrolled, while actual numbers of enrolled dual eligibles was closer to 3,000.  MedPAC recalculated the total savings to be approximately $9,000 per year.  In contrast, CMS found that Colorado state’s demonstration increased Medicare Part A/B spending.

Overall, MedPAC thought that the limited data showed that the demonstrations were going well despite the challenges at the start of the programs.

  1. MedPAC’s mandated report regarding the effects of the Hospital Readmissions Reduction Program

As part of the 21st Century Cures Act mandate, MedPAC provided a report on whether the Hospital Readmission Reduction Program (“HRRP”) had any effect on readmission rates.  MedPAC found that readmission rates declined faster after the program was enacted.  Although some critics of the program suggested that HRRP only shifted patients from readmission hospital stays to observation stays and emergency department (“ED”) visits.  However, MedPAC stated that its analysis showed rapid growth in use of observation and ED with and without an inpatient stay, suggesting that HRRP did not drive the increase.  Additionally, MedPAC also reported that overall, HRRP decreased mortality rates.  The one mortality that increased was heart failure, but MedPAC explained that the reason for the increased heart failure mortality was probably because of the decline in initial admissions (easier cases being treated on an outpatient basis), thereby increasing the raw readmission rates for more complicated conditions (e.g., heart failure).

  1. MedPAC discusses modifying Medicare rules to allow Discharge Planners to recommend higher-quality PAC providers

MedPAC discussed the possibility of modifying Medicare’s rules to permit discharge planners, under some circumstances, to recommend certain Post-Acute Care (“PAC”) providers. Beneficiaries served by low-quality providers are at an increased risk of re-hospitalization and more likely to experience negative clinical outcomes than beneficiaries served by higher quality providers. As such, it is central to both the integrity of the Medicare program and wellbeing of the beneficiaries that the value of the dollars spent on PAC is maximized.

Although the IMPACT Act required hospitals to use quality data during the discharge process and provide it to beneficiaries with the hopes that they would choose higher-quality PAC providers, preliminary reviews and data have shown that this method has failed to gain traction. MedPAC found that beneficiaries prefer to rely on information from trusted sources, such as their health care provider, families and friends over the reported quality data when it comes to choosing a PAC provider. This can be partially attributed to the fact that, as it stands, a discharge planner cannot recommend a specific PAC provider, but can only present the data to the beneficiary.

Thus, by modifying the rules to permit discharge planners to proactively recommend “higher-performing” PAC providers, discharge planners could assist beneficiaries in understanding the extent to which the quality of care varies among PAC providers within the beneficiary’s geographical area. Along with such a policy, the definition of “higher-quality” or “higher-performing” PAC would have to be established and quantified. MedPAC proposed both a “flexible” and “prescriptive” approach to defining a “higher-quality” PAC provider, and is awaiting Commissioner reaction to the different approaches or any other models that should be further considered.

  1. MedPAC discusses payment accuracy for sequential PAC stays

The Commission has long advocated for implementing a unified prospective payment system (“PPS”) for all four settings of post-acute care (“PAC”). Under such a system, each stay is considered an independent event, and payment is based on the average cost of stays. To reflect their much lower cost, the unified PPS would have a large adjustment for home health agencies. However, sequential stays, defined as a PAC stay within 7 days of a previous PAC stay, pose two challenges to payment accuracy. First, payments should track the cost of each stay in a sequence of care. Over the course of care, a beneficiary’s care needs are likely to fluctuate, with initial stays having different average costs than later stays. MedPAC found that the cost per stay for home health agencies are much lower for later stays in a sequence than the earlier stays. Thus, without some sort of an adjustment, profitability under a PAC PPS would be higher for later home health stays. If payments do not accurately reflect these fluctuations in care, providers may base their care on financial reasons rather than on the best course of care for the patient. Second, as regulations are aligned, some providers may opt to treat patients over a continuum of care, which makes it difficult to ensure that providers are accurately paid for each phase of care without improperly inducing volume of PAC admission. MedPAC discussed various strategies to counter the incentive to increase subsequent PAC stays, including redefining a “stay” as a long duration, requiring physician attestation of continued need of care, and implementing value-based purchasing that would include a resource use measure.

  1. MedPAC proposes two draft recommendations related to Emergency Department Use

MedPAC presented two draft recommendations related to improving efficiency and preserving access to emergency department (“ED”) care in both rural and urban areas. The primary objective has long been to preserve access to care in rural areas, by providing for higher inpatient rates to providers for rural PPS hospitals, and implementing a cost-based payment for critical access hospitals. However, these strategies have become increasingly inefficient and do not always preserve emergency access, as seen by declining admissions at critical access hospitals over the last 12 years. Thus, MedPAC proposed establishing a 24/7 ED in outpatient-only hospitals for isolated hospitals (those more than 35 miles from other hospitals). Such a program would be funded by outpatient PPS rates per service, as well as Medicare fixed subsidies to fund standby costs, emergency services, and physician recruitment. Such a policy would maintain emergency access in isolated areas and offset the cost of the additional ED payments with efficiency gains from consolidating inpatient services.

MedPAC’s second policy option addresses urban stand-alone EDs, where MedPAC is concerned that Medicare is encouraging overuse of ED services. MedPAC found that urban stand-alone EDs appear to have lower patient severity and lower standby costs than on-campus EDs (“OCEDs”) even though they are paid on the same basis as OCEDs. Thus, MedPAC recommended that policymakers consider either of two options for urban OCEDs in close proximity to on-campus hospital EDs (within six miles).  One option would be to have Medicare pay OCEDs a reduced Type A payment rate by using a fixed percentage across each of the five levels of ED service. The second option would be to pay these facilities Type B rates, which would lower ED payments, on average, by 28% across all five ED levels. For urban OCEDs that are more isolated from on-campus hospital EDs, MedPAC suggested permitting them to receive the higher-paying Type A rates as they currently do. The rationale for these policies would be to better align payments with the cost of care, to reduce incentives to build new EDs near existing sources of emergency care, and to preserve access to ED services where they are truly needed.

The Medicare Payment Advisory Commission (“MedPAC”) met in Washington, DC, on October 5-6, 2017. The purpose of this and other public meetings of MedPAC is for the commissioners to review the issues and challenges facing the Medicare program and then make policy recommendations to Congress. MedPAC issues these recommendations in two annual reports, one in March and another in June. MedPAC’s meetings can provide valuable insight into the state of Medicare, the direction of the program moving forward, and the content of MedPAC’s next report to Congress.

As thought leaders in health law, Epstein Becker Green monitors MedPAC developments to gauge the direction of the health care marketplace. Our five biggest takeaways from the October meeting are as follows:

  1. MedPAC reports the results from its recently conducted survey regarding telehealth utilization across the healthcare system.

This past summer, MedPAC identified several large health programs, Medicare beneficiaries, primary care physicians, and home health agencies to survey with the goal of better understanding their use and attitudes toward telehealth.  Results of this survey show that despite the success of certain telehealth programs for health plans (e.g., telestroke, telemental health) and the increased use of telehealth services among home health agencies, many of those surveyed believe that telehealth provides convenience and improves care only in limited circumstances.  There appears to be a consensus among plans, providers, and beneficiaries that there is little incentive to employ direct-to-consumer (“DTC”) telehealth services.  Even health systems that use telehealth services for pre-operation and follow-up visits, and observed reductions in hospital inpatient readmissions, reported that telehealth services are only financially justified if they help avoid Medicare’s inpatient readmission penalties.  Among surveyed beneficiaries, a majority reported that they are unlikely to use DTC telehealth services because they already have access to their normal physicians via email and telephone.  The beneficiaries’ reported that their primary concern is DTC services only provide them access to random physicians who would not be familiar with their medical histories.  Primary care physicians (“PCPs”) appeared to be concerned that DTC services would only add to their already burdened caseloads.  This sentiment seems founded in PCPs’ reports that electronic medical record systems add time and technical complications to their days instead of simplifying or making their jobs more effective or efficient.

The health plans surveyed by MedPAC cited various factors they believe hinder adoption of telehealth services, such as: federal and state regulations that limit Federal health care program coverage of telehealth services according to geographic locations or originating sites; the elimination of broadband subsidizing programs; and a perceived increased in administrative burden (i.e., complicated Medicare billing practices, required licensing for telehealth clinicians in each state, and credentialing telehealth providers for each facility.)  The health plans’ responses also suggest that state laws that mandate payment parity between in-person and telehealth services are more likely to encourage expansion of telehealth use than laws that merely mandate coverage parity between the two.

  1. MedPAC discusses commercial health plans’ telehealth coverage.

In MedPAC’s September meeting, MedPAC commenced discussion concerning Medicare payments for telehealth services, as mandated under Congress’ 21st Century Cures Act of 2016.  This month, MedPAC continued that discussion by addressing coverage of telehealth services by commercial health plans.  MedPAC’s discussion included the analysis of 48 individual plans available across all 50 states.  The plans included managed care products and various types of commercial health plans such as employer, individual, small and large group, and exchange plans.[1]

Interestingly, MedPAC’s findings do not indicate a significant difference between Medicare and commercial health plans in telehealth utilization and coverage.  The majority of health plans reported less than 1% of their plan enrollees using some form of telehealth service during the year.  The highest reported use was still less than 5% of enrollees.

Unlike Medicare, commercial health plans are more likely to cover urban-originating sites. However, only approximately half of the surveyed plans cover a patient’s residence as an originating site.  MedPAC found the most commonly covered telehealth services are basic Evaluation and Management (E&M) physician visits, mental health visits, and pharmacy management visits, but few cover a broad range of telehealth services.

The MedPAC report demonstrates that commercial health plans do not implement telehealth services to reduce costs, but rather to keep up with competitors who offer these services.  However, while the plans also did not report actual reductions in costs resulting from telehealth services, they did report improvements in convenience and access and increased telehealth use would eventually translate into cost reductions.

  1. MedPAC proposes eliminating the Merit-Based Incentive Payment System.

MedPAC proposed a drastic policy change to the Medicare Access and CHIP Reauthorization Act (“MACRA”); specifically to its Merit-Based Incentive Program (“MIPS”). MedPAC is concerned that the MIPS will not achieve the goal of identifying and rewarding high-value clinicians because it is overly complex and places an excessive burden on clinicians who wish to comply with reporting standards. Moreover, MedPAC states that the measures used are not proven as associated with high-value patient care or improved patient outcomes. Finally, because clinicians choose on which measures they are evaluated, each clinician’s composite score is comprised of performance on different measures. This leads to inconsistencies in how clinicians are compared to each other, and therefore inequities in their payment adjustments.

Given the above, MedPAC proposed a policy option to eliminate individual-level reporting requirements of the MIPS and to establish a voluntary value program in its place. The new voluntary value program would encourage fee-for-service clinicians to join other clinicians and assume responsibility for the health outcomes of their collective patient panels. Clinicians would have the option of being measured as part of a larger group, comprised of other clinicians in their area or affiliated hospitals. Moreover, population-based measures would easily be extracted from the claims submitted by the clinicians – significantly reducing their reporting burden.

MedPAC is considering formalizing this policy proposal as a draft recommendation in December.

  1. MedPAC proposes limiting the use of Physician-Owned Distributors through the Stark law.

MedPAC proposed two policy approaches to limit the use of Physician-Owned Distributors (“PODs”) through the Stark law. PODs currently operate under the indirect compensation exception and “per unit of service” rule of the Stark law, which allows their business model to avoid self-referral liability. However, MedPAC is concerned that this “loophole” contradicts the spirit of the law because it has the potential to influence care based on financial incentives.

The first proposed policy approach would eliminate the application of the “per unit of service” rule to PODs, which would result in PODs no longer meeting the indirect compensation exception. CMS took this type of direct action before when, after reports of abuse, they explicitly eliminated the application of the per unit of service rule to space and equipment leases. The second proposed policy approach redefines PODs as Designated Health Service entities under the Stark law, thereby prohibiting physician ownership of PODs. Under this new definition, physicians with stakes in PODs would be prohibited from referring patients for services using devices supplied by their POD unless another exception applied.

To address the concerns regarding the effect of these policy changes on medical device innovation, MedPAC proposed an exception for large, publicly traded PODs and for PODs that meet specified, limited criteria – for example, if less than 40% of a POD’s business is generated by physician-owners.

If Congress, or more likely, CMS, implements these changes to the Stark Law, hospitals will have a strong incentive to monitor their supply chain to avoid denial of payment and False Claims Act liability. Further, although such changes would limit PODs, some PODs would likely survive on the ability to sell to non-DHS entities, such as ambulatory surgical centers.

  1. MedPAC recommends paying for sequential stays and aligning regulatory requirements in a unified payment system for post-acute care.

MedPAC discussed the continuation of its efforts for a Post-Acute Care (“PAC”) unified payment system. Specifically, MedPAC addressed two important implementation efforts: 1. the effect of sequential stays in PAC on payment; and 2. how to align the relevant regulatory requirements with the new payment system.

The unified payment system would make payments based on patient characteristics rather than patient settings. As a result, sequential PAC stays in different settings would present challenges to accurate payment. MedPAC wants to ensure that the new payment system would not inadvertently shortchange or influence the care that beneficiaries receive. As such, MedPAC plans to examine the cost of stays over the next year, comparing the length of initial stays and the length of later stays, and to consider policies that adjust payments to more accurately reflect the cost of care.

Similarly, regulatory requirements would need to be reformed to align with a new unified PAC payment system. MedPAC proposed various possibilities, such as eliminating the 25-day average length of stay requirement for long-term care hospitals or eliminating the 60% rule for inpatient rehabilitation facilities, as payment would no longer be based on the setting of the care provided.

MedPAC will conduct research on the implementation of a PAC unified payment system in the coming months for inclusion in the June 2018 report.

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[1] MedPAC did not include fee-for-service plans in its report.

The Medicare Payment Advisory Commission (“MedPAC”) met in Washington, DC, on September 7-8, 2017. The purpose of this and other public meetings of MedPAC is for the commissioners to review the issues and challenges facing the Medicare program and then make policy recommendations to Congress. MedPAC issues these recommendations in two annual reports, one in March and another in June. MedPAC’s meetings can provide valuable insight into the state of Medicare, the direction of the program moving forward, and the content of MedPAC’s next report to Congress.

As thought leaders in health law, Epstein Becker Green monitors MedPAC developments to gauge the direction of the health care marketplace. Our five biggest takeaways from the September meeting are as follows:

  1. MedPAC opens the new season with daunting challenges facing the Medicare program.

MedPAC began the 2017-2018 MedPAC year by providing context to the issues MedPAC will address this coming year. Starting from 2014, healthcare spending has modestly accelerated, driven in part by health insurance expansions under the ACA and increases in prescription drug spending.  Additionally, because of increased enrollment,  the size of the Medicare program will nearly double within the next decade; rising from approximately $700 billion in total spending in 2017 to more than $1.3 trillion in 2026.  The increasing cost to the Medicare program, in conjunction with the decreasing workforce contribution per beneficiary, is projected to deplete several Medicare funds such as the HI Trust Fund, which covers Part A services, by 2029.  Unless federal revenues, which are historically approximately 17 percent of GDP, increase above 19 percent, Medicare, Medicaid, other major federal health programs, Social Security, and net interest are projected to outpace total federal revenues by 2039.  Also, MedPAC showed that out-of-pocket spending for healthcare services by Medicare beneficiaries and by individuals and families in private insurance plans, are continuing to increase.

  1. MedPAC discusses two comparative clinical effectiveness research programs that may address low-value spending.

MedPAC presented two sponsor comparative clinical effectiveness research initiatives: (1) the Patient-Centered Outcomes Research Institute (“PCORI”); and (2) the Institute for Clinical and Economic Review (“ICER”). PCORI was established and funded by the Patient Protection and Affordable Care Act to identify, fund, and disseminate comparative clinical effectiveness research.  As of July 2017, it has awarded $1.69 billion to approximately 580 comparative clinical effectiveness research, data infrastructure, and methods projects.  Additionally, PCORI launched pragmatic clinical trials, which compare two or more alternatives for preventing, diagnosing, treating, or managing a particular clinical condition.  To date, $289 million has funded 24 pragmatic clinical trials.  PCORI’s funding will expire September 30, 2019 if it is not reauthorized by Congress.

ICER is an independent nonprofit organization mostly funded 70% by various other nonprofit organizations, but also funded 30% by health care industry entities, i.e., life science companies, health plans, and pharmacy benefit management companies.  ICER compares clinical and cost-effectiveness of a treatment versus its alternative.

Because most of the studies are still ongoing, it is unknown how Medicare’s utilization of data from these programs implicates or will implicate low-value spending.

  1. MedPAC begins Medicare payments for telehealth services discussions under Congress’ 21st Century Cures Act of 2016 mandate.

Congress mandated MedPAC to answer the following questions by March 15, 2018:

  • What telehealth services are covered under the Medicare Fee-for-Service program Parts A and B?
  • What telehealth services do commercial health plans cover?
  • In what ways can commercial health plan coverage of telehealth services be incorporated into the Medicare Fee-for-Service program?

MedPAC briefly addressed the first question at the meeting. Medicare covers telehealth in four areas of the program with varying degrees: (1) physician fee schedule (“PFS”); (2) other fee-for-service payment systems (“FFS”); (3) Medicare Advantage (“MA”); and (4) the Center for Medicare and Medicaid Innovation (“CMMI”) initiatives.  Medicare coverage for PFS is constrained.  Medicare will cover PFS only if the telehealth services: (i) originate in rural areas and take place at one of several types of facilities; (ii) are conducted via two-way video or store-and-forward technology; and (iii) are for particular fee schedule service codes (i.e., office visits, mental health, substance abuse, and pharmacy management).  The reason for coverage parameters is because there is no incentive to curb the use of telehealth services, and therefore there is concern of a volume incentive.  In contrast, there is flexible coverage for FFS, MA, and CMMI initiatives because the incentive to use telehealth services exists only if it reduces costs.  The latter two questions will be addressed in the following two months.

  1. MedPAC addresses the Specialty Pharmacy Industry, and recommends reform in management and data disclosure.

MedPAC began with a general overview of the specialty drug market before shifting to specific specialty drug policy issues within the context of Medicare. In sum, pharmacy benefit managers (“PBMs”) and specialty drug management will have to be reformed in order to contain increased drug spending.

First, MedPAC discussed the use of exclusive specialty pharmacy networks in Part D. Although the “any-willing provider” rule in Part D precludes the use of exclusive networks, MedPAC found that PBMs could get around the rule by “setting fees that discourage certain specialty pharmacies from participating in their network.” Thus, MedPAC recommends Congress to consider the effect of such exclusive networks on the availability of specialty drugs for Medicare beneficiaries. If more of the rebates and fees for specialty drugs shift from PBMs to specialty pharmacies, it may mean increased Medicare program costs.Second, MedPAC recommends CMS provides Plan D sponsors increased access to data related to the amounts of rebates or fees received by PBMs. Plan D sponsors currently do not have access to such information when requested and such disclosures would be “essential for accurate payment, program integrity, and…in evaluating PBM performance.”Third, MedPAC proposed allowing Medicare Advantage Prescription Drug plans (“MA-PDs”) to manage specialty drugs as medical benefits, as is done within the commercial sector. Increased integration in how medical and pharmacy benefits are managed would cap drug spending and facilitate better care. However, MedPAC recognizes that in order for such integration to be feasible, “programmatic changes” within Medicare would have to occur.

  1. Use of High Quality Post-Acute Care Providers by Medicare Beneficiaries

Post-acute care (“PAC”) in the United States is delivered primarily through skilled nursing facilities (“SNFs”), home health agencies (“HHAs”), patient rehab facilities, and long-term acute care hospitals. About 40% of hospital discharges use one or more of these services, and approximately $60 billion was spent on PAC in 2015. MedPAC’s concern lies not in the availability of PAC facilities, but in the quality of care provided by the majority of PAC facilities. The rate of rehospitalization doubles between a SNF in the bottom quartile of performance and a SNF in the top percentile. As such, ensuring adequate placement of beneficiaries in high quality PAC facilities is imperative in ensuring long-term health and decreasing repeated hospitalizations. However, the challenge lies in just how to incentivize beneficiaries to choose higher-quality PAC facilities upon discharge.

Medicare has publicly released data rating various SNFs and HHAs; however, the data reflects broad categories of patients and does not report results for specific conditions. Indeed, MedPAC found that such data generally fails to influence which PAC facility a beneficiary will choose. MedPAC considered a wide array of policies and incentives that could positively impact which PAC facilities beneficiaries will attend after discharge.

First, MedPAC supports granting hospitals greater flexibility to recommend PAC providers as part of the discharge process. Hospitals are currently prohibited from recommending specific PAC providers. Granting such flexibility would align discharge planning with the accountability for post-hospital care that hospitals have under programs such as the Hospital Reduction Program or within ACOs. MedPAC also recommends strengthening and implementing current requirements, such as those set forth by the IMPACT Act, which require hospitals to use quality measures as a factor in discharge planning and require providing such quality data to beneficiaries. Furthermore, MedPAC recommends expanding the financial incentives for hospitals and PAC providers to provide higher-quality care. For example, the Hospital Reduction program currently penalizes hospitals with high rates of readmission for six conditions. MedPAC suggested expanding the number of conditions subject to the penalty could encourage hospitalize to scrutinize the quality of the PAC provider to which patients are referred. Finally, MedPAC suggested expanding value-based purchasing programs for PAC facilities.

Post-Acute Care in Transition:  Tackling the Legal/Regulatory Transformation of the Industry

Health Care Entities and the ADA:  Part 2 – Complex Issues in the Reasonable Accommodation of Patients, Residents & Guests with Disabilities

Wednesday, July 16, 2014, at 12:00 PM – 1:00 PM (EDT)

Presenters:
Andrea R. Calem, Epstein Becker Green
Frank C. Morris, Jr., Epstein Becker Green

In part two of the webinar series, Epstein Becker Green attorneys explain the laws, regulations, enforcement considerations and hot-button issues relating to the accommodation of individuals with disabilities (be they patients, customers, or members of the public).

Their discussion will focus on the public access provisions of the Americans with Disabilities Act, the Rehabilitation Act, and state statutes, which require health care entities and other public accommodations to make their goods and services fully accessible to individuals with disabilities. Some of the issues to be explored will include:

  • Must a health care provider incur construction costs to reconfigure its treatment rooms?
  • Can hospitals or post-acute care facilities be sued if their websites or online scheduling tools are not accessible to those with sight impairments?
  • Must health care facilities modify diagnostic equipment to make it more accessible to individuals using wheelchairs?
  • What are the required dimensions for accessible changing rooms?
  • Must a skilled nursing facility hire a sign language interpreter for hearing-impaired patients or companions?

We hope that you will join us as we explore these and other hot-button issues confronting post-acute care facilities and all other health care businesses today.

Registration Is Complimentary 

To register for this webinar, please click here.