The Medicare Payment Advisory Commission (“MedPAC”) held its monthly public meetings in Washington, D.C., on November 1-2, 2018. The purpose of this and other MedPAC public meetings 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 November meeting:

  1. MedPAC Reviewed Mandate Related to Long-Term Care Hospitals and Presented Initial Findings Using Data Through 2016

In response to a congressional mandate due in June 2019, the Commission reviewed operational changes made by Long-term Care Hospitals (LTCHs) in response to policy changes and performance trends, patterns of post-hospital discharge to other post-acute care and hospice providers, and LTCH quality data since the implementation of the new dual-payment rate structure.  For operational changes, the degree of change that occurred varied from facility to facility.  It was reported that some LTCHs either changed their admission patterns to admit only patients who met criteria, continued to take beneficiaries who do not meet the criteria, or halted admitting cases that did not meet criteria.  It was also reported that some LTCHs made efforts to contract with private payors, including Medicare Advantage plans, in order to expand the mix of patients and payors.  Additionally, facilities examined increased their capabilities adding bariatric and ICU beds as well as telemetry services.  However, these changes often led to a decline in occupancy and closures.  Over 40 facilities closed (roughly 10% of the industry) – most located in an area with other LTCHs.

In terms of discharges, the share of cases that met the criteria for the new dual-payment rate structure increased from 50% to 64% over the last few years.  This was attributed to some facilities having the capacity to change their admission patterns and take a higher share of cases that meet the criteria.  Finally, LTCH quality data showed that measures of unadjusted direct acute-care hospital re-admissions, in-LTCH mortality, and 30-day mortality remained stable since 2015.  Whereas 30-day mortality and re-admissions have remained at similar rates, the rate for in-LTCH mortality has increased.  However, the Commission could not conclude whether these changes in quality were the result of implementing the dual-payment rate structure.

  1. MedPAC Discusses Ways CMS Could Improve the Use of Functional Assessment in the Medicare Program

MedPAC staff examined the pros and cons of the use of functional assessment in the Medicare program to improve functional assessment usage in the Medicare Program.  MedPAC highlighted that patient assessment data does not always reflect the actual care needs of patients.  Concerns relative to function data reported by Inpatient Rehabilitation Facilities (IRFs), Home Health Agencies, Skilled Nursing Facilities (SNFs), and Long-term Care Hospitals (LTCH) were expressed in regards to payment incentives received by these entities.  When reporting rules changed relative to financial incentives, the mentioned entities changed the amount of therapy they offered and how they coded therapy modalities.  MedPAC believed that if providers were making these changes based on financial incentives, the recording of disability would likely increase since payments are tied to functional status.  Thus, the Commission suggested that CMS could help improve the accuracy of these provider-reported data or collect information about patient function by (1) improving monitoring of provider-reported assessment and penalize providers found misreporting; (2) requiring hospitals to complete discharge assessments to patients referred to post-acute care; and (3) gathering patient-reported outcomes (PROs).

  1. Promoting greater Medicare-Medicaid integration in dual-eligible special-needs plans

MedPAC presented potential policies that would promote greater Medicare-Medicaid integration in dual-eligible special needs plans (“D-SNPs”) to improve care coordination and health outcomes.  Under the existing structure, D-SNPs only enroll dual eligible beneficiaries compared to regular plans which open up to all beneficiaries in their service area.  D-SNPs are required to follow an evidence-based model of care and must take steps to integrate Medicaid coverage by forming contracts with states that meet certain minimum standards.  However, there are D-SNPs that require higher standards for integration that are known as fully integrated D-SNPs, or FIDE SNPs, which enables such plans to receive higher Medicare payments.  Under the FIDE SNP framework, the plan must have a capitated Medicaid contract, which includes acute and primary care services along with services like nursing home care.  Currently, the challenge has been the low levels of integration as most plans either do not provide Medicaid services or provide a limited subset, such as Medicare cost sharing.  Factors that have limited Medicaid integration in D-SNPs include the large number of D-SNP enrollees that are partial-benefit dual eligible as well as misaligned enrollment.

MedPAC proposed a couple of changes that could assist in achieving greater integration.  First, it was proposed that there should be a limit on the ability of partial dual beneficiaries to enroll in D-SNPs.  Secondly, the Commission proposed requiring D-SNPs to follow an aligned enrollment practice where beneficiaries cannot enroll in a D-SNP unless they were enrolled in a Managed Long Term Services and Supports (“MLTSS”) plan offered by the same parent company.  The goal is that this policy would ensure that all D-SNP enrollees are receiving both Medicare and Medicaid benefits from the same parent company while laying the foundation for integration into other areas, such as developing a single care coordination process overseeing all Medicare and Medicaid service needs.

  1. MedPAC Reviews Its Recommendations for Improving the Medicare Advantage Quality Bonus Program and Provides Potential Next Steps

MedPAC led off its presentation by summarizing the Medicare Advantage (“MA”) quality bonus program, which has been implemented since 2012. This program pays bonuses to MA plans based on their overall “star rating,” which tracks and weighs forty-six quality measures. MA plan contracts greater than or equal to a 4-star rating receive the bonus, which ultimately increases a plan’s ability to receive rebate dollars (and therefore attract beneficiaries by reducing enrollee premiums and/or offering coverage to a greater variety of services). Overall star ratings and the breakdown of MA plans’ individual quality measures are publicly reported and can be accessed via Medicare’s Health Plan Finder. MedPAC then expressed its concern for the effectiveness of these star ratings and resulting bonus payments. Notably, these star ratings are awarded at the MA contract level, meaning that the star rating often applies to a vast geographical region. Indeed, according to MedPAC, “about 40 percent of enrollees of MA [Health Maintenance Organizations] and local [Preferred Provider Organizations] are in contracts that include enrollees from non-contiguous states.” Moreover, MedPAC stated that boosted star ratings are the result of health care “consolidations,” where the acquired MA contract inherits the star rating of the “surviving” MA contract. These factors have led to “unwarranted bonus payments” and decreased reliance on star rating as an indicator for plan quality in the enrollee’s region.

In its March 2018 report to Congress, MedPAC recommended two courses of action to address these flaws: (1) freeze quality reporting units at pre-consolidation so these plans do not inherit the ratings of their acquirer and (2) require quality reporting at local market level instead of the large MA contract level. In the meeting, MedPAC stated that the Bipartisan Budget Act of 2018 partly addressed the first recommendation—the act requires an average of quality results for consolidated contracts effective in year 2020.[1]

MedPAC then provided its current recommendations for improving the MA quality bonus program. MedPAC advocated for (1) restructuring the MA bonus evaluation system to remove the current seventeen “process measures”[2] and (2) implementing a “claims-based” outcome measures based on MA claims and encounters, which would, according to MedPAC, improve accuracy and uniformity, align more closely with fee-for-service quality results, and lessen reporting burdens. MedPAC also presented “cliff” and “plateau” issues with the bonus cutoff[3] and offered the potential solution of “a continuous scale for bonus payments” similar to its hospital value incentive program (“HVIP”).[4] MedPAC also presented this solution to address the “tournament model” of the current star system.[5] Finally, MedPAC proposed solutions to various issues with the quality measures (e.g., uneven measure adjustments, narrow differences in measure results, etc.). MedPAC plans to further discuss how to move the MA quality bonus program towards budget neutrality.

  1. MedPAC Reviews Medicare Advantage Encounter Data and Introduces Proposed Policy Options for the Program

In 2012, CMS started to collect “encounter data”[6] from MA plans, mainly for purposes of risk adjustment. MedPAC stated that it has access to this encounter data for 2012–2014 (and “preliminary files” for 2015) for six provider types/settings.[7] For each of these settings, MedPAC validated encounter data by comparing it with other data sources of MA utilization. MedPAC uncovered three broad categories of MA encounter data issues in its review: (1) MA plans “are not successfully submitting encounters for all settings,”[8] (2) “about 1 % of encounter data records attribute enrollees to the wrong plan,”[9] and (3) there were substantial differences in encounter data from other data sources used for comparison. MedPAC focused its discussion on addressing this third issue.

MedPAC compared encounter data with four other MA utilization sources that originate from provider reports (including hospitals, home health agencies, skilled nursing facilities, and dialysis facilities). Encounter data was not consistent with these reports. In 2015, the percentage of MA enrollees reported in encounter data were consistent with the following reports:

  • 90% encounter data consistency with data reported by hospitals (for inpatient stays)
  • 89% consistency with data reported by dialysis facilities (for having dialysis services)
  • 49% consistency with data reported by skilled nursing facilities (for skilled nursing stays)
  • 47% consistency with data reported by home health agencies (for home health services)

These results, combined with MA plans’ lack of encounter data submissions, demonstrate a need for CMS to better assess encounter data completeness and ensure consistency and ability to utilize this data for risk adjustment. MedPAC then gave three policy options to incentivize MA plans to submit complete encounter data: (1) to expand the performance metric framework (e.g., to include specific information about missing encounter data); (2) to apply payment withholds proportional to degree of incomplete encounter data submissions; and (3) to collect encounter data through Medicare Administrative Contractors (which already process fee-for-service claims for all Part A and B services). By enforcing complete encounter data through these methods, MedPAC hopes to learn more about how care is provided to MA enrollees and ensure Medicare benefits are properly administered.

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[1] MedPAC expressed concern that various “consolidation strategies” may still result in unwarranted higher star ratings and accompanying bonus payments.

[2] MedPAC asserted that these administrative measures could effectively be monitored by compliance activities.

[3] Currently, the 4-star requirement for bonus acquisition causes two distinct issues. Contracts with a overall rating of less than 3.75 stars (which is rounded to 4 stars) do not receive any bonus payments (i.e., the “cliff”), and contracts with an overall rating above 4 stars receive “the same benchmark increase” as those with 4-star ratings (i.e., the “plateau”) and there are minimal incentives to reaching star rating above a 4.

[4] A recent blog post discussed MedPAC’s review of its new HVIP in the September meetings.

[5] Under this tournament model, 5-star plans exist despite decreases in overall quality. MedPAC also suggested the establishment of pre-set objectives to promote improvement.

[6] Health care providers generate this “encounter data,” which includes detailed documentation of diagnosed clinical conditions and items and services furnished to treat these conditions.

[7] The six provider types/settings MedPAC referred to are “physician/supplier Part B,” inpatient hospital, outpatient hospital skilled nursing facility, home health, and durable medical equipment.

[8] According to MedPAC, only 80% of MA contracts have “at least one encounter record for each of the six settings.”

[9] MedPAC asserts that this issue may be corrected by changing data processing.

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.