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Digging in deeper: MedPAC report’s SNF findings

On March 15, the Medicare Payment Advisory Commission (MedPAC) issued its annual report to Congress. In the report, MedPAC addresses the SNF PPS in Chapter 8. MedPAC states that most indicators of payment adequacy for SNFs are positive.

Here are some findings published in the report:

  • Access to SNF services remains stable for most beneficiaries. The number of SNFs participating in the Medicare program increased slightly between 2010 and 2011. Bed days available did not change between 2009 and 2010, the most recent years with available data. The median occupancy rate was 88%, indicating some excess capacity for admissions. Days and admissions on a per FFS beneficiary basis were essentially unchanged between 2010 and 2011.
  • SNF quality of care, as measured by risk-adjusted rates of community discharge and rates of rehospitalization for patients with five potentially avoidable conditions, has changed little over the past decade. This year, the Commission reports a third measure—rehospitalizations within 30 days of discharge from the SNF. The three measures show considerable variation across the industry.
  • Increases in payments between 2010 and 2011 outpaced increases in providers’ costs, reflecting the continued concentration of days in the highest payment case-mix groups. In addition, payments in 2011 were unusually high because of overpayments resulting from an adjustment made with implementation of the new case-mix groups. Because no 2011 cost report data were available, we estimated a range for the 2011 margins of 22%t to 24%. This year is the 11th year in a row with Medicare margins above 10%. We project that the 2013 margin will range from 12% to 14%.

Each year, MedPAC issues recommendations to Congress about different sectors of healthcare. For SNFs this year, MedPAC has not released any new recommendations, but continues to recommend a 2012 recommendation. Last year, MedPAC made a recommendation to first restructure the SNF payment system and then to rebase payments in the following year. The recommendation read as follows:

  • The Congress should eliminate the market basket update and direct the secretary to revise the prospective payment system for skilled nursing facilities for 2013. Rebasing payments should begin in 2014, with an initial reduction of 4% and subsequent reductions over an appropriate transition until Medicare’s payments are better aligned with providers’ costs.

The Commission discussed three revisions to improve the accuracy of payments.

  • First, payments for therapy services should be based on patient characteristics (not services provided).
  • Second, payments for nontherapy  ancillary services (such as drugs) need to be removed from the nursing component and made through a separate component established specifically to adjust for differences in patients’ needs for these services.
  • Third, an outlier policy would be added to the PPS. After the PPS is revised, in the following year, CMS would begin a process of rebasing payments, starting with a 4% reduction in payments.

When this recommendation was made in March 2012, its spending implications were that it would lower program spending relative to current law by between $250 million and $750 million for fiscal year 2013 and between $5 billion and $10 billion over five years. Savings occur because current law requires a market basket increase (offset by a productivity adjustment, as required by the Patient Protection and Affordable Care Act of 2010). Updated for implementation a year later, the direction of the savings is identical. The one-year savings estimate remains the same, while the five-year estimated savings grew slightly and are over $10 billion.

Read the entire report here.