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Written by: Bob Habasevich, PT on Thursday, September 27, 2012 Posted in: Inpatient Rehab

Report to the Congress: Medicare Payment Policy (March 2012)

After reading the MEDPAC annual report to Congress, IRF providers should not expect much to change for the Medicare payment program in 2013.  Based on their review of IRF activity through May of 2011, the Commission is recommending, “The Congress should eliminate the update to the Medicare payment rates for inpatient rehabilitation facilities in fiscal year 2013.” Which if enacted, means payment rates for 2013 will mirror those for 2012.

Report Highlights for IRF

– In 2010, almost 360,000 Medicare fee-for-service (FFS) beneficiaries received care in IRFs.

– In 2010, there were about 1,180 IRFs in the United States, with at least one in every state and the District of Columbia.

– Between 2009 and 2010, Medicare FFS expenditures for IRFs increased from $6.03 billion to $6.32 billion, largely due to a 2.25 percent update to the base payment rates in 2010, a 4.4 percent increase in outlier payments and an increase in patient severity.

– IRF occupancy rates and the number of rehabilitation beds declined slightly by 0.5 percent and 0.9 percent, respectively in 2010.

– The decline in IRF beds in 2010 is the result of a 1.6 percent decrease in hospital-based IRF beds and a 0.2 percent increase in freestanding IRF beds from 2009.

– The number of some types of patients treated in IRFs has declined, but data suggest that skilled nursing facilities (SNFs) and home health agencies have been able to fill in for IRFs and provide these beneficiaries with rehabilitation care.

– Volume of services — The volume of Medicare FFS beneficiaries treated in IRFs—as a measure of resources, or services, used—remained relatively stable in 2010.

– Assessment of hospital discharge patterns to post acute care settings suggests that beneficiaries who were not admitted to IRFs, as a result of renewed enforcement of CMS’ compliance threshold beginning in 2004, were able to obtain rehabilitation care in other settings, such as SNFs and home health agencies.

– The mean adjusted cost per discharge for all IRFs in 2010 was $15,205. On average, after adjustment, costs per discharge in freestanding IRFs were about $3,890 (24 percent) lower than in hospital-based IRFs, and costs per discharge in urban IRFs were approximately $3,766 (21 percent) lower than in rural IRFs. Average costs per discharge also declined as a facility’s number of beds increased. In 2010, costs per discharge were $6,042 (33 percent) lower in facilities with more than 60 beds than in facilities in the 1- to 10-bed range. The differences in costs by number of beds suggest that larger facilities have economies of scale that result in lower costs per discharge.

– More than half of hospital-based IRFs (58 percent) have fewer than 21 beds, whereas 50 percent of freestanding IRFs are facilities with 60 beds or more.

As stable as the IRF sector appears, Congress will get no reprieve from the pressures of reform as they consider again the urgency to adjust payment for physicians and other healthcare providers subject to the Sustainable Growth Rate (SGR) system. This system, which ties annual updates to cumulative expenditures since 1996, has failed to restrain volume growth, and in fact, may have exacerbated it. The SGR formula—combined with temporary stop-gap fixes—have undermined beneficiaries’ and providers’ confidence in Medicare. The cost of full repeal, as well as the cost of temporary reprieves, grows perpetually. With this assessment, the Commission recommends that the Congress fully repeal the SGR.

The Commission’s Recommendations to Fully Repeal the SGR System

– The Congress should repeal the sustainable growth rate (SGR) system and replace it with a 10-year path of statutory fee-schedule updates. This path is comprised of a freeze in current payment levels for primary care and, for all other services, annual payment reductions of 5.9 percent for three years, followed by a freeze. The Commission is offering a list of options for the Congress to consider if it decides to offset the cost of repealing the SGR system within the Medicare program.

– The Congress should direct the Secretary to regularly collect data—including service volume and work time—to establish more accurate work and practice expense values. To help assess whether Medicare’s fees are adequate for efficient care delivery, the data should be collected from a cohort of efficient practices, rather than a sample of all practices. The initial round of data collection should be completed within three years.

– The Congress should direct the Secretary to identify overpriced fee-schedule services and reduce their RVUs accordingly. To fulfill this requirement, the Secretary could use the data collected under the process in recommendation two (above). These reductions should be budget neutral within the fee schedule. Starting in 2015, the Congress should specify that the RVU reductions should achieve an annual numeric goal—for each of the five consecutive years—of at least 1.0 percent of fee-schedule spending.

– Under the 10-year update path specified in recommendation one (above), the Congress should direct the Secretary to increase the shared savings opportunity for physicians and health professionals who join or lead two-sided risk accountable care organization (ACOs). The Secretary should compute spending benchmarks for these ACOs using 2011 fee-schedule rates.

The proposed updates reduce fees for most services; however, the Commission finds it crucial to protect primary care from fee reductions, leaving the reductions to specialists. You now have some sense why Congress is edgy.

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