Mapping Out A Unified Post-Acute Care Payment System Prototype

The idea of a unified post-acute care payment system has captured the imagination of home health industry stakeholders for years. One question that has always loomed large, however, was how one payment system could be applied to skilled nursing facilities (SNFs), in-patient rehabilitation facilities (IRFs), long-term care hospitals (LTCHs) and, of course, home health providers.

The Consolidated Appropriations Act 2021 required the Medicare Payment Advisory Commission (MedPAC) to design a prototype prospective payment system (PPS) for all post-acute care providers, as well as examine its potential impacts.

“Congress required that the design span the four [post-acute care] settings, and base payments on patient characteristics, not the setting,” Carol Carter, a principal policy analyst at MedPAC, said during the presentation.


During a meeting that took place on Thursday, MedPAC assessed the reasons for a post-acute care PPS, and presented possible design features.

The presentation that took place during the meeting was one in a series of others to prepare a mandated report, due June 30, 2023, on a post-acute care PPS.

There are a number of reasons why there is interest in a post-acute care PPS. One of the top ones is that some beneficiaries who have similar conditions and comorbidities are treated in different settings, but because of the separate Medicare payment systems for each setting payments can differ substantially.


Another major reason is that there are perceived flaws in the designs of the home health and SNF payment systems.

“There were shortcomings in the home health and SNF PPSs that encourage providers to furnish unnecessary rehabilitation therapy, and to selectively admit certain types of patients over others,” Carter said.

Plus, the different quality measures and patient assessments made it difficult to compare patients, costs and outcomes across various post-acute care settings.

In order to create a post-acute care PPS, MedPAC began by identifying its key features.

“[This included] using a stay as the unit of service, an adjustment for home health stays,” Carter said. “Otherwise, these stays would be way overpaid and institutional care would be substantially underpaid.”

It also included a uniform set of risk adjusters, a targeted rural payment policy and adjustment for home health stays that occurred late in a sequence of post-acute care.

“Otherwise, these later stays, which have lower costs, would be overpaid,” Carter said.

Other payment adjusters include a short-stay outlier policy and a high-cost outlier policy. The MedPAC analysts found no need for an additional adjustment for teaching status that IRFs currently receive.

Carter noted that further analysis was needed to assess if there should be an adjustment for providers treating high shares of low-income patients.

The analyst also evaluated the design by examining three aspects.

“First, the accuracy of [post-acute care] PPS payments for various patient groups, and we concluded that they would be accurate,” Carter said. “To examine the equity of payments, we looked at the profitability of different types of cases, we concluded that a [post-acute care] PPS could increase the equity of payments. Third, we modeled the impacts on providers, and found that there will be considerable redistribution of payments, from rehabilitation to medically complex patients and from more costly to the less costly settings.” 

The analysts also looked at the implementation issues of a post-acute care PPS. They looked at whether a post-acute care PPS should be budget neutral to the current level of payments.

“The Commission recommended that the aggregate level of payments should be lowered when a [post-acute care] PPS is implemented,” Carter said.

They also examined whether a [post-acute care] PPS should be implemented with a transition.

“Based on analysis of the distribution of impacts, the Commission recommended a relatively short transition to a [post-acute care] PPS,” Carter said. 

To address regulatory alignment, MedPac proposed basing requirements on patients rather than setting.

“For example, if a provider opted to treat patients on ventilators, it would have to meet additional requirements specific to that care,” Carter said.

MedPAC also noted that a value incentive program should accompany the implementation of a post-acute care PPS.

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