2015 MedPAC report to Congress: Recommendations for skilled nursing facilities, inpatient rehabilitation facilities, and long term care hospitals

During an earlier announcement, we shared the summary about the MedPAC 2016 payment rate and programmatic recommendations for inpatient and outpatient hospitals as well as for ambulatory surgical centers. This summary discusses skilled nursing facilities, inpatient rehabilitation facilities, and long-term care hospitals.

Skilled nursing facilities

MedPAC uses the following indicators to determine whether the Medicare payment rates for skilled nursing facilities (SNFs) are at appropriate levels: capacity and supply of providers, volume of services, quality of care, providers’ access to capital, and provider costs. Using these, MedPAC made the same recommendations for this March 2015 report as they have in previous reports to Congress. The recommendations include:

  • SNFs should not have their payment rates updated and therefore Congress should not implement the market-basket increase for SNFs that was slated for 2016.
  • The prospective payment system (PPS) for SNFs should set base payment rates on patient characteristics instead of the amount of rehabilitation therapy provided. 
  • The PPS for SNFs should also separate non-therapy ancillary services, such as the administration of drugs, from the nursing component of the PPS.
  • In 2017, the payment rates for SNFs should be lowered by 4 percent and then MedPAC would evaluate whether they would need to recommend additional percentage decreases to ensure that payment rates were appropriate for SNF services.

Inpatient rehabilitation facilities

MedPAC uses the same indicators that they use for SNFs to determine whether Medicare payment rates for inpatient rehabilitation facilities (IRFs) are adequate.  The March 2015 MedPAC recommendations for IRFs include:

  • IRFs should not have their payment rates updated and therefore Congress should not implement the intended increase for IRFs for 2016.
  • IRFs should receive the same, site-neutral, base payment rates as SNFs for certain conditions. This change to base payment rates for IRFs should be phased in over 3 years beginning in 2017.
  • MedPAC will continue to evaluate whether or not different types of cases across IRF providers are adequately taken into account in determining appropriate base rates for the IRF prospective payment system.

Long-term care hospitals

MedPAC uses the same indicators that they use for SNFs and IRFs to determine whether Medicare payment rates for long-term care hospitals (LTCHs) are adequate. Although the first part of this three-part series already outlined some of the MedPAC March 2015 report recommendations for LTCHs, the following includes those and additional recommendations from the report:

  • LTCHs should not have their payment rates updated and therefore Congress should not implement the intended increase for LTCHs for 2016.
  • LTCHs should only serve chronically critically ill (CCI) patients.
  • LTCHs standard payments should be limited to those patients that spent 8 or more days in the Intensive Care Unit (ICU) of the acute care hospital they were treated at immediately preceding their stay at the LTCH.
  • If LTCHs do serve a non-critically ill patient, then the payment rates to LTCHs for these types of cases should be the same as the payment rates for equivalent types of cases at acute care hospitals.

It is unclear if Congress or CMS will act on these recommendations with either legislative or regulatory action. However, if the current sustainable growth rate (SGR) repeal bill is signed into law, there will be changes made to payment rates for some of these facilities. We will continue to monitor the SGR bill and any other policy or regulatory initiatives regarding payments to these types of facilities. The third part of this series will outline the MedPAC recommended 2016 payment rates and program updates to home health and hospice services.

Medicare Payment Advisory Commission (MedPAC)

On March 13, the Medicare Care Payment Advisory Commission (MedPAC) released the first of its two 2015 reports to Congress. MedPAC is comprised of seventeen commissioners that meet throughout the year and then release a report to Congress in March and June of each year summarizing their conclusions and providing recommendations on various aspects of Medicare policy. The March 2015 report provides, among others, recommendations regarding Medicare payment rates and programs to different types of providers, a summary of the Medicare Advantage and Part D programs, and other major policy reform recommendations such as a permanent repeal of the sustainable growth rate (SGR) formula.

For more information on this topic, or to learn how Baker Tilly healthcare specialists can help, contact our team.