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July 13, 2022

AHA criticizes HHS' 'unworkable' PAC model

Daily Briefing

    HHS and the Office of the Assistant Secretary for Planning and Evaluation (ASPE) last week released a report on a proposed unified post-acute care (PAC) payment model that would merge four Medicare payment systems into one. However, the American Hospital Association (AHA) pushed back against the proposed model, saying it has "numerous fundamental flaws."

    The case for systemness in post-acute care

    HHS' proposed unified PAC PPS

    Under the 2014 Improving Medicare Post-Acute Care Transformation (IMPACT) Act, HHS is required to develop a prototype unified PAC prospective payment system (PPS). To develop the model, researchers analyzed Medicare claims and enrollment data, PAC assessment data, and Medicare cost report data.

    According to the report, the model aims to merge four existing Medicare payment systems (skilled nursing facility (SNF), home health agency (HHA), long-term care hospital (LTCH), and inpatient rehabilitation facility (IRF)) into one comprehensive PPS. Instead of basing PAC payments on provider types, payments would be divided into three general categories based on beneficiary clinical characteristics:

    • Medical and diagnosis-related
    • Rehabilitation and therapy-related
    • Medication management, teaching, and assessment

    In addition, each general category has PAC case-mix groups that differentiate patients' needs based on clinical characteristics, including self-care and mobility and primary PAC diagnosis, and relative costliness. The model also includes new indicators to reflect the type of PAC setting a patient is treated in and whether the provider is based in a rural area.

    Overall, final payment to a PAC provider would be calculated by a conversion factor that accounts for additional labor adjustments in specific geographic regions.

    According to HHS and ASPE, the proposed model is still in the early stages, and several changes will need to be made before it can go into effect. For example, the agency only used data between 2017 and 2019 and did not account for the Covid-19 pandemic. The model also did not consider new updates to the HHA or SNF payment systems.

    "Although we believe that the clinical concepts and analytic approach upon which the prototype is based are sound, it will be important to understand the implications for costs of care of COVID-19 and the revised payment systems, and to recalibrate the payment weights accordingly," the agencies wrote.

    AHA pushes back on 'fundamental flaws' in HHS' model

    In response to the report, AHA said the proposed model has "numerous fundamental flaws which render it unworkable for both patients and providers."

    According to AHA, the model "lacks a comprehensive and reliable risk adjustment approach, which endangers access to care—particularly for the most critically ill patients" and "is largely based on out-of-date patient utilization patterns and patient care protocols." The organization also criticized how the model identifies patients' clinical characteristics, calling the definitions and guidelines "inconsistent."

    Overall, AHA said the proposed model "fails to align payments with the costs of treating the widely varied PAC patient population - which is essential to ensure access to quality care" and recommended against considering the model for any future action.

    "The agencies should go back to the drawing board to create a solution that both reflects the current health care delivery system and ensures access to care for all Medicare PAC patients," AHA said. (King, Fierce Healthcare, 7/8; Stulick, Skilled Nursing News, 7/11; AHA press release, 7/7; HHS PAC model report, 7/7)


    Advisory Board's take

    Our take: 2 ways post-acute leaders can prepare for site-neutral payments

    By Blake Zissman and Monica Westhead

    The proposal of a unified payment model isn't a surprise to the post-acute industry, but it does leave us several open questions:

    • How will it affect each site of care's bottom line?
    • How might it impact referrer behavior?
    • How will it affect—or be affected by—existing staffing shortages?

    And there's more than just these unanswered questions—the model would require an overhaul of post-acute care's clinical diagnosis codes. The foundation of the proposed model is the Unified PAC Clinical Groups (UPCG), which represent the first level of clinical classification for the patient's primary reason for care. These are not currently standardized across the industry, and there's a lot of work to be done to make them operationally feasible for payment purposes.

    In addition to the unanswered questions and lack of legislative recommendations, a final version of the proposed model is still years away—and may look very different from the proposal before us.

    While we wait for this information, there are areas where post-acute leaders and organizations should continue to focus in order to prepare for an eventual site-neutral payment rollout.

    1. Continue to improve clinical quality and patient outcomes. CMS suggests the value-based purchasing program be considered in future iterations of the model, and historical context from hospital and physician payment transformation has underlined CMS's desire to move toward more value-based payment structures across the board.


    2. Build staff pipelines and promote staff retention. While sustainable staffing is critical to all strategic and operational goals, it may be especially important should a final rule include labor adjustments, just like this proposal includes.


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