MedPAC Questions Home Health Providers’ Reporting on Patient Functional Ability

For years, the Medicare Payment Advisory Commission (MedPAC) has floated the idea of a unified payment system for all post-acute care providers — skilled nursing facilities (SNFs), in-patient rehabilitation facilities (IRFs), long-term care hospitals (LTCHs) and home health agencies.

MedPAC and its team of 17 commissioners provided additional insight into what a potential unified model may look like in its latest report, released late Friday. For home health providers, MedPAC’s recommended model — one based on stays rather than episodes — would mean a projected payment cut of about 5%.

Meanwhile, besides the unified payment model, MedPAC also questioned home health providers’ reporting on patient functional ability.


Established by the Balanced Budget Act of 1997 to advise Congress on Medicare issues, MedPAC releases two reports each year: one in March and one in June. Although MedPAC was formed to report on the Medicare program and guide lawmakers’ decisionmaking, its suggestions often go overlooked.

In theory, MedPAC’s idea to roll all post-acute payment into one comprehensive system is meant to more closely align reimbursement with cost of care and level the playing field between settings. Currently, SNFs, IRFs, LTCHs and home health agencies all use different assessment tools and payment mechanisms.

MedPAC officially began exploring a unified payment model in 2016.


Broadly, there are two main avenues for a possible post-acute payment system, according to MedPAC.

The first is an episode-based design, which would include only post-acute care and exclude prior hospital stays, intervening hospital stays during the episode and Part B furnished. The second is a design based on overall post-acute care stays and all that they entail.

MedPAC advised against an episode-based design due to overpayment issues that would likely arise, especially in the home health space.

“An episode-based PPS would encourage providers to furnish an efficient mix of PAC and dampen FFS incentives to furnish unnecessary PAC services within the episode,” MedPAC officials wrote in Friday’s report. “However, given the overpayments for short episodes and underpayments for long ones that would likely result, some providers could respond in unintended ways that could impair access to high-quality care for beneficiaries.”

“Past behavior suggests that some providers would respond to the financial incentives by avoiding beneficiaries who would likely require extended PAC and by basing treatment decisions (such as whom to admit and when to discharge or transfer a patient) on financial considerations rather than what is best for the beneficiary,” they continued.

Under a stay-based model, the payment-to-cost ratio of home health services would fall from about 1.18 to 1.12, according to MedPAC. For context, a 1-to-1 ratio would mean that for every $1 providers receive, they would be providing $1 worth of home health services.

SNFs appear to gain the most in MedPAC’s stay-based unified post-acute care payment system, with IRFs losing the most.

MedPAC also touched on home health providers’ allegedly sketchy self-reporting of patient functional ability to perform activities of daily living (ADLs).

As of January 2016, home health agencies in nine states receive payment adjustments — rewards or penalties — based on their prior-year performance on certain quality measures, including improvement in function. The payment adjustments are carried out as part of the Value-Based Purchasing program from the Centers for Medicare & Medicaid Services (CMS).

Between 2014 and 2017, home health agencies, on average, reported improvements from admission to discharge in three activities of daily living — improvement in bathing, ambulation and bed transfer, according to MedPAC.

However, more objective claims-based measures of adverse hospital events showed no improvement. Meanwhile, the rate of emergency department use increased slightly, and the hospitalization rate remained about the same.

“These findings are surprising because — based on studies that have found an association between functional status and hospital use — we would expect patients with fewer limitations in ADLs to be less likely to require visits to the emergency department or unplanned hospitalizations,” MedPAC officials wrote.

The entire MedPAC report can be found here.

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