Making Sense of a Unified Post-Acute Value-Incentive Program

Home health agencies have had to navigate several changes since 2020, from the payment mechanics of the Patient-Driven Groupings Model (PDGM) to the new policies of the public health emergency (PHE).

Yet there’s another change on the distant horizon that forward-thinking operators can’t afford to forget about: a unified payment system for post-acute care providers, one that’s rooted in value-based care.

As mandated by the Consolidated Appropriations Act of 2021, the Medicare Payment Advisory Commission (MedPAC) in its March report explored what a unified post-acute care value-incentive program (PAC VIP) would mean, if implemented. The commission likewise flagged some of the biggest hurdles to such a payment overhaul.

After reading through MedPAC’s evaluation of a unified PAC VIP, it’s clear to me that there would likely be winners and losers among home health organizations. What’s also clear is just how difficult it would be for the U.S. Centers for Medicare & Medicaid Services (CMS) to actually move forward with a site-neutral reimbursement program.

The backstory

The post-acute care space is made up of thousands of home health agencies, skilled nursing facilities (SNFs), in-patient rehabilitation facilities (IRFs) and long-term care hospitals (LTCHs). In terms of dollars, the home health slice of that PAC pie was about $17.1 billion in 2020, according to CMS data.

Currently, home health agencies, SNFs, IRFs and LTCHS each have their own Prospective Payment System (PPS), despite the fact that they often care for similar patients. While home health agencies have PDGM, for example, SNFs have the Patient-Driven Payment Model (PDPM).

To streamline post-acute spending, Congress has asked MedPAC and the U.S. Department of Health and Human Services to establish site-neutral payments based on patient characteristics rather than setting. A budget proposal released by the Trump administration in February 2020 suggested that a single PAC PPS would save an estimated $101.5 billion from 2021 to 2030.

Prior to the PHE, when home health agencies and SNFs were both transitioning to new payment constructs, I began to notice more momentum behind the unified-payment-model idea. Others did as well.

“We have a real future threat coming in the unified post-acute payment [system],” home health veteran April Anthony said at the 2019 Home Health Care News Summit. “I think that could really turn into the next PDGM — and I think it could happen sooner than PDGM even settles out.”

Policy expert Lisa Grabert, a research professor at Georgetown and Marquette universities, even told me that a political “food fight” was shaping up in Washington, D.C., led by the IRFs and LTCHs that were projected to lose out under a unified PPS.

“It seems that they’re more squarely in the camp of wanting to see a delay for quite a long time,” Grabert said in November 2019. “But that may create a bit of a food fight because there may be some other stakeholders who see this as a big opportunity to gain new volume and new revenues under Medicare not necessarily available to them in the past.”

The push for a PAC payment overhaul became derailed with the onset of the PHE, however, as the health care system and its policymakers needed to respond to an unprecedented crisis.

Must-have components of unified PAC VIP

Somewhat ironically, it’s the COVID-19 pandemic and lessons learned from the past two years that may rekindle unified payment model conversations.

During the PHE in 2020, Medicare beneficiaries avoided SNFs and were treated elsewhere, MedPAC wrote in its March report. Between 2019 and 2020, of the top conditions discharged from hospitals and referred to PAC, the shares treated in SNFs dropped, while the shares going to home health agencies and, to a lesser extent, IRFs rose.

More recent data from analytics firm CarePort, a WellSky company, reinforces the migration of patients from the SNF to home health settings.

“Since COVID began in April of 2020, we have seen amongst our roughly 1,000 acute care clients that referral volume to skilled nursing has yet to recover,” Tom Martin, director of post-acute care analytics at CarePort told me in December. “And the referral volume to the home health industry has increased and sort of maintained [a level of] about 10% above the 2019 baseline.”

Generally, these observations support the idea that home health agencies and SNFs often care for similar patients. That, in turn, suggests there’s viability for a common payment methodology.

But what are the must-have components of a unified post-acute care payment program centered on value-based care? According to MedPAC, there are at least five.

1. A small set of performance measures based on clinical outcomes, patient experience and resource

Policymakers would need to identify whether PAC providers are scored in a PAC VIP using a common set of measures, unique setting-specific measures or some combination of both. If such a model were implemented, measures would likely focus on hospitalizations while on care, successful discharge to the community and Medicare spending per beneficiary.

2. Strategies for ensuring reliable measure results

A PAC VIP would need to base its scoring on real differences among providers, not random variation. Before this kind of site-neutral payment overhaul is put in place, CMS would need to figure out a way to level the playing field and ensure all stakeholders were starting from the same point.

3. System to distribute upside or downside payment adjustments with minimal “cliff” effects

The framework of a PAC VIP would need to avoid “cliff” effects and “cut points.” In other words, it would have to avoid rigid tiers or set-in-stone benchmarks that could, in theory, reward or penalize providers with very similar scores depending on which side of those benchmarks they fell. In addition to a more continuous distribution strategy, policymakers would need to decide whether a provider should meet some minimum performance standard before it earns performance points that translate into a reward, MedPAC cautioned.

4. A method to distribute the entire provider-funded pool of dollars in a fair manner

The PAC VIP would likely redistribute withheld funds to providers based on their performance, similar to the Home Health Value-Based Purchasing (HHVBP) Model. Before that, policymakers would need to determine the size of rewards and penalties needed to motivate providers to improve performance.

5. An approach to account for differences in patients’ social risk factors

A main criticism of some value-based care payment models, including HHVBP, is a failure to account for highly complex patient populations and social determinants of health. A home health agency located in a low-income area that’s also a food desert faces more challenges, for instance, than a peer agency located in a more affluent area with plenty of resources.

Barriers to a post-acute care payment overhaul

There are several things that would need to happen before a unified PAC VIP became the law of the land.

Today’s setting-specific practice patterns, such as using “episodes” in some settings and “stays” in others, would need to converge. Likewise, CMS would need to begin holding all PAC providers to the same regulatory requirements.

In my view, though, the biggest barrier to a unified PAC VIP is figuring out how to account for social risk factors, as there is no single, clean way of doing this. In its report, MedPAC floated the idea of using established area-level measures of social risk, including:

– Area Deprivation Index (ADI): A tool for tracking neighborhood socioeconomic disadvantages using American Community Survey data collected by the U.S. Census

– Social Vulnerability Index (SVI): A tool from the Agency for Toxic Substances and Disease Registry that measures the potential negative effects of external stresses on specific communities’ health

– PLACES: A U.S. Centers for Disease Control and Prevention (CDC) tool designed to help local health departments and jurisdictions better understand the burden and geographic distribution of health-related outcomes in their areas, enabling them to plan public health interventions

Key takeaways for home health agencies

Considering what would need to be included in a unified post-acute care value-incentive program, forward-thinking home health operators should continue their focus on lowering hospitalization rates and overall patient satisfaction.

But with a potential focus on Medicare spending per beneficiary, more agencies will likely need to adopt technology solutions and practices aimed at improving efficiency and delivering the right amount of care for quality outcomes.

As part of its exploration of a PAC VIP, MedPAC designed a prototype based on the five “must-haves” listed above and ran its own analysis. Here are some of the findings that stood out to me related to the home health space:

– SNFs and home health agencies had the most variable performances of all post-acute care settings.

– With home health agencies and LTCHs, as a provider’s share of fully dual-eligible beneficiaries increased, average performance improved. In contrast, SNFs and IRFs with high shares of fully dual-eligible beneficiaries had worse performances than those with low shares.

– Nonprofit and government-affiliated home health agencies received larger rewards under a unified PAC VIP, on average, compared to other providers.

– Hospital-based home health agencies received much larger rewards, on average, compared to freestanding providers.

– Home health agencies with high shares of patients admitted from the community had a worse performance compared with peers with a high share of patients from institutional settings.

Value-based care in Medicare Advantage

The MedPAC special report examines a unified post-acute value-based care program within fee-for-service (FFS) Medicare. A separate study published this March in JAMA Network Open offers new insight to value-based care with Medicare Advantage (MA).

The study wasn’t heavy on home health-specific findings, but nonetheless included some interesting takeaways for providers.

As part of the study, put together by Harvard, Humana Inc. (NYSE: HUM) and the Tufts University School of Medicine, researchers identified nearly 490,000 beneficiaries enrolled in plans offered by a large MA organization from Jan. 1, 2017 to Dec. 31, 2019, categorizing them according to the payment model for their attributed primary care organization. Categories included FFS, shared savings with upside-only financial risk, and shared savings with upside and downside financial risk.

After identifying and categorizing the population, the researchers used claims data to track hospitalizations, observation stays and emergency department (ED) visits.

Compared with FFS, beneficiaries cared for under two-sided risk models had lower rates of hospitalizations, observation stays and ED visits, according to the study. The adjusted rate of ED visits per 1,000 patients for two-sided risk models, for example, was 375.8, compared to 434.1 for FFS.

The same can’t be said for upside-only models.

“These findings are consistent with evaluations of value-based payment in traditional Medicare and serve to expand the evidence base around value-based payment models in Medicare Advantage,” the researchers noted. “The lack of significant differences between FFS and upside-only risk models suggests that downside financial risk may play a key role in effective value-based payment arrangements.”

Home health providers have urged MA plans to give them access to more risk-based opportunities. The findings in this study, I believe, now give them more firepower in that ask.