Harvard Medical School’s David Grabowski: PDGM Is a ‘Brave New World’

The post-acute care sector is still a long ways away from the implementation of a unified payment system, but the Patient-Driven Groupings Model (PDGM) may be a step in that direction.

That’s according to Harvard Medical School professor David Grabowski.

As a professor in the department of health care policy, Grabowski’s work is concentrated on the economics of aging, with a focus on post-acute care and long-term care specifically. In his career, Grabowski has served on a number of Centers for Medicare & Medicaid Services (CMS) technical expert panels; he was also previously the principal investigator on five research project grants from the National Institute on Aging. 

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Home Health Care News recently caught up with the Harvard professor to discuss Medicare Advantage (MA), a unified payment system and what PDGM will mean for home health providers.

During the conversation, Grabowski also explained why he sees post-acute care as a historic “piggy bank” for hospitals and health systems. 

Below are highlights from HHCN’s conversation with Grabowski, edited for length and clarity.

HHCN: In the past, you’ve said that home health providers often lack bargaining power in their conversations with Medicare Advantage plans. Can you expand on that idea?

Grabowski: In terms of the different industries that Medicare Advantage plans pay in the health care sector — think about hospitals, physician groups and different post-acute care providers, just to name a few — it tends to be that hospital systems and physician groups have a lot of market power. I think about the Boston market, where I live and work, and some of these hospital groups carry a lot of weight, and it’s important to many patients to go to particular hospitals and see particular physicians.

They have a lot of leverage in negotiating with Medicare Advantage plans. My sense is that while home health is a really important, it’s not as large as the hospital or the physician sectors. I would also argue that maybe it accounts for a lot less of care in terms of spending.

So, in terms of negotiating, home health providers often end up having to accept lower payment rates. If you look at the rates that are paid to hospitals and physicians across MA and traditional Medicare, it is pretty similar. Yet if you look at home health agencies or skilled nursing facilities (SNFs), it is less.

On the SNF side, you’ve also mentioned in the past that the quality of facilities that MA enrollees utilize relative to traditional Medicare tends to be lower in terms of quality and hospital readmission rates. Can the same thing be said for home health?

People in traditional Medicare are more likely to enter a high-quality home health agency, studies have shown. The least likely individuals to go into a quality home health agency are those in low-quality Medicare Advantage plans.

Two points there: One, even a high-quality Medicare Advantage plan is below traditional Medicare in terms of access to high-quality home health care, just based on the star ratings of the home health agency. But even within Medicare Advantage, there’s some variation, in that some plans are most definitely better than others in terms of access to these high-quality settings.

The other point that I would stress here is you might be thinking this has something to do with location or where somebody lives. Even if you live relatively close or relatively far from these high-quality agencies, if you are in Medicare Advantage, you’re less likely to enter a high-quality home health agency.

You’ve talked about post-acute care being used as a “piggy bank” for hospitals. What does that mean?

It’s not just hospitals. I think it’s been a piggy bank for alternative payment models. It’s been a piggy bank for accountable care organizations (ACOs). It’s been a piggy bank for bundled payment models. Post-acute care has been the primary source of savings.

There’s a lot that these alternative payment models could do to coordinate care. They could decrease readmissions. They could refer patients to better quality SNFs or home health agencies. There is no evidence they do any of those things.

However, there is evidence they cut the use of post-acute care. They do that in two ways: One, they cut it on what I would term “extensive margin,” so they’re just limiting the use of all of these settings. They are also limiting it on what I would call the “intensive margin,” so conditional on being admitted to a skilled nursing facility, conditional on being admitted to a home health agency — you’re using less of those services.

I think this has been a bigger deal for institutional post-acute care because that’s more costly than home health. There is a potential in home health to be this kind of source of lower costs for post-acute care relative to institutional care, but I think these alternative payment models have viewed home health as an area to cut, so they haven’t quite come out ahead to date.

There is the potential to be a landing spot as individuals are referred out of SNFs.

We are getting closer to PDGM. What should home health providers be prepared for when it comes to navigating the payment model?

I think it’s going to be a brave new world.

It’s going to be a totally different ballgame in terms of the incentives. I think that the first incentive is going to be just around the types of patients that are going to be lucrative. The types of patients that are desirable on the part of home health agencies are really going to shift.

Today, home health is very much built around therapy. There’s a huge reward for delivering therapy. Under this new model, it’s very much going to be about the characteristics of the patients that you admit. I think the first big part of this is just home health agencies getting ready for admitting a different mix of patients.

I think home health agencies are sending out therapists a lot. I think the incentives to do that going forward under the payment model are going to be a lot less. We are already starting to see this with SNFs and [the Patient-Driven Payment Model]. It just began yesterday, and already we’re hearing reports that a lot of the big skilled nursing facility chains are wondering about laying off therapists.

And home health agencies are still living in this value-based payment world with alternative payment models and other things. So how do you continue to show value to these different potential partners.

How close are we to seeing the implementation of a unified payment model for post-acute care services, in your view?

I still think there’s a lot of details to be worked out there. I think there had been one plan put forward to begin to sort of implement [something] this calendar year, and obviously we’re almost towards the end of the calendar year with nothing in place. I think we’re still a ways off.

I will say that both the new home health and the new SNF payment models are very consistent with what’s outlined in the unified payment model. Even though I think PDPM and PDGM are separate from the unified payment model, they could be seen as steps in that direction of getting away from a therapy-based payment model.

I do think if Congress wants to go in that direction. Those could be two building blocks towards that.

What are the potential challenges in achieving this — and what are some possible benefits?

There are a number of challenges. Each of the four settings for post-acute care — home health, SNFs, in-patient rehab and long-term care hospitals — are completely separated in how they are regulated. I think there’s been a lot of work that’s been conducted around unifying the payments, but I do think there’s a lot of other steps that will need to come into place.

The [benefit] is that by harmonizing payments, quality, cost-sharing and regulation across sectors, you ultimately correct for some of the real distortions that we have in post-acute care right now.

For example, let’s take a moderate stroke patient. She could be discharged to a home health agency, SNF or in-patient rehab, and the regulations that would govern her care and the payments that would be associated with her care would be completely different across those settings.

It’s not clear right now that we’re getting good value for the amount more that we’re paying in certain settings. I think by leveling the playing field in terms of payments across the sectors, we encourage patients to go to the appropriate setting.

I think under the current system there’s too much waste and too many distortions.

A new round of Medicare readmission penalties hit 2,583 hospitals across the country. What’s your take on this and how it ties into post-acute care — or even non-medical home care?

I think a lot of us had hoped that as a way to sort of decrease potential readmissions, [hospitals] would work with SNFs and home health agencies to find partners. Keep in mind, with this program, the hospitals are just at risk for the readmission — not for any of the post-acute care spending.

I really thought that this could cause a real uptick in post-acute care spending, but that really hasn’t been something that we’ve observed.

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