Section for Long Term Care and Rehabilitation Dallas, Texas February 27-28, 2001

1. Washington Report… Section for Long Term Care and Rehabilitation Dallas, Texas February 27-28, 2001 Brian Ellsworth and Barbara Marone Senior Associate Directors American Hospital Association

2. Summary of MedPAC’sView of Post-Acute CareDraft Chapter 6 of the March 1, 2001 Report to Congress:”Post-Acute Care Prospective Payment: Current Issues and Longer Term Agenda”

3. Post-acute Care • Skilled nursing facilities • Home health agencies • Inpatient rehabilitation facilities • Long-term care hospitals

4. Context for Post-acute Care:Rapid Growth, Then Cutbacks • 34% growth in post-acute expenditures per year from 1988-94 • 25% of Medicare inpatient users went to a post-acute setting in 1997 • SNF payments declined from $11 to $9.4 billion during 1997- 99 • Home health payments declined from $17.8 to $9.5 billion during 1997-99

5. Post-acute: Difficult to Compartmentalize ~ Different conditions of participation ~ Differences in Medicare coverage criteria

6. MedPAC Study on Post-acute Substitution:Findings and Recommendation • Difficult to predict post-acute setting with administrative data • “Empirical evidence on substitution weak” • Recommendation:Secretary should conduct empirical study to assess extent of substitution across settings

7. MedPAC: Need for “Common Core” of Data Elements • Goal: Improve payment systems and quality monitoring • Likely elements: Functional status, diagnosis, comorbidities, cognitive status • Recommendation: While implementing BIPA provision to develop patient assessment instruments with comparable common data elements, the Secretary should minimize reporting burden and unnecessary complexity while assuring that only necessary data are collected for payment and quality monitoring

8. MedPAC Critique of MDS-PAC • Overly long: 400+ items • Complex: inconsistent timeframes, different rating scales • Does not adequately assess needs of medically complex patients

9. MedPAC: Medicare Needs to Pay Correctly across Settings • Access and care delivery should not be driven by financial considerations • Equal payment for equivalent services • Recommendations:Secretary should develop for potential implementation a patient classification system that predicts costs within and across post-acute settings; Secretary should conduct demonstrations to test feasibility of including larger scope of services in the payment bundle

10. Shorter Term Payment Issues • SNF PPS refinement • Rehabilitation PPS implementation • Home health PPS monitoring

11. Skilled Nursing Facility PPS – Problems • MDS does not collect variables that account for higher acuity patients • RUGs uses staff time to measure resource use • Recommendation:Secretary should develop a new classification system for SNF care while continuing to monitor access and quality

12. MDS Problems • Never explicitly tested with skilled patients • Large intra-group variation in resource use • Poor accuracy and inter-rater reliability

13. SNF PPS – Adequacy of Payment(distinct from allocation of payments) • MedPAC found no evidence of critical need to increase base payments above current law • Access to SNFs: No widespread problems found • Exit and entry into SNF market: More SNFs since BBA; decline in number of hospital-based facilities • Payment and use from 1996 to 1999 indicates overall growth

14. SNF PPS – Adequacy of Payment(distinct from allocation of payments) • Number of certified skilled nursing facilities by type and year

15. Rehabilitation PPS: Concern about MDS-PAC • Imposes undue data collection burden and short-term disruption • MDS-PAC does not accurately measure cognitive status • Reverse coding of ADLs confusing to longstanding FIM users • Lengthy form with multiple assessments during an episode • Recommendation:Until a core set of common data elements for post-acute care is developed, the Secretary should require the Functional Independence Measure as the patient assessment tool for the inpatient rehabilitation PPS

16. MedPAC: Other PPS Issues • Rehabilitation PPS • Recommendation:Higher outlier percentage of 5% and study whether a different policy is needed • Recommendation:Secretary should re-examine the disproportionate share adjustment • Recommendation: Update the case mix weights over time • Home Health PPS • Recommendation:Secretary should monitor use of significant change in condition payment adjustments and payments for wound care

17. AHA View of MedPAC Post-acute Chapter: Overall Comments • Adequately presents complicated topic • Is generally consistent with the Commission’s discussions over the last few months • The AHA appreciates MedPAC’s attention to regulatory burden and system coherence issues

18. AHA View: Post-acute Chapter • Not enough specifics on the rationales for standardization of assessment elements, which might include: • Improvement in reliability of the data • Reduction of silo effect • Increase in ability of providers to cross-train nurses • Increase in efficiency of information systems

19. AHA View: Post-acute Chapter • Looking across settings, more emphasis needs to be placed on: • Patient severity measurement problems • Differences in coverage criteria • Differences in regulatory requirements • AHA has significant ongoing concern about adequacy of payment for medically complex patients

20. SNF, Home Health, Rehabilitation PPS and Regulatory Updates

21. Skilled Nursing Facility PPS • BIPA changes to be implemented 4/1/01 • 16.66% adjustment to nursing component • Modification to 20% add-ons (6.7% for rehab) • Market basket changes • No Part B Consolidated Billing • Case mix refinement unlikely in 2001, HCFA to issue RFP for more research • April proposed rule to address swing beds, and may “discuss” market basket and wage index

22. Skilled Nursing Facilities: Quality Indicators • Research on 21 new quality indicators for post-acute underway, AHA commented in November: • Not adequately risk adjusted • Concern about reliability of the data • Potential for perverse incentives • Pilot tested in 2001, implementation timeframe unclear

23. Home Health PPS • Ongoing concerns about cash flow due to unforeseen billing system problems & vendor software inadequacies • BIPA adjustments • PIP extension • Market basket reduction eliminated for 2001 • 15% reduction delayed to 2003 • Temporary 10% add-on for rural HHAs • Homebound definition clarification

24. Home Health: 2001 agenda • Legislative • Repeal 15% reduction • Medical supplies for chronically ill patients • Promote refinements to PPS to simplify the system and improve payment accuracy • Adverse event reports • OASIS data reliability questions • Not risk adjusted • Advanced beneficiary notices

25. Rehabilitation PPS: AHA Supports Basic System Goals • AHA Concerns • HCFA policy decisions • System timing • Specific technical features

26. Data Collection for Rehab PPS AHA recommends that HCFA use FIM • Field is familiar with FIM • Validated by HCFA’s researchers • Smaller number of data items • Less paperwork burden MedPAC recommends:Until a core set of common data elements for post-acute care is developed, the Secretary should require the Functional Independence Measure as the patient assessment tool for the inpatient rehabilitation PPS

27. MDS-PAC Costs

28. Timing of Rehab PPS • Anticipate October 1, 2001 startup • Information system changes • Training • Field-testing • Response to comments – refinements of case mix system and payment features

29. Medical Complexity • Payment system falls short in recognizing medically complex cases • CMG compression • Shortfalls from transfer policy • Inadequacy of outlier payment

30. Inter-relationship of the Key Elements of the Proposed Rehab PPS PAYMENTFEATURE: Short staytransfers(paid as per diem) Patients with short stay twice as likely to have comorbidities as others. CORE PROBLEM: Inadequate recognition of the effect of multiple comorbiditieson per diemroutine costs. PAYMENTFEATURE: Outlier payment Facility costs are estimated using routine charges, which do not vary enough by CMG. PAYMENT FEATURE: Case weight compression Routine costs do not vary enough by CMG. OUTCOME: Systematic under-reimbursement for inpatient rehabilitation facilities with a high proportion of patients with multiple comorbidities.

31. Rehab PPS: AHA Recommendations • Remedy compression of the case mix weights • Eliminate (or narrow the scope of) the transfer policy, particularly with respect to medically complex patients • Pay 150 percent for the first day’s care under any transfer policy • Modify the outlier policy for medically complex cases to ensure that facilities with justifiably higher high routine costs are appropriately recognized

32. Other Policy Concerns • Disproportionate share hospitals • Represents 40% of payment per case on average • No threshold to qualify for adjustment • Indirect proxy for case mix...? • Impact of DSH on provider behavior • Indirect Medical Education • Insignificant effects on universe, significant effects on those with sizeable GME programs MedPAC recommendation:Secretary should re-examine the disproportionate share adjustment for the inpatient rehabilitation prospective payment system

33. Latest RAND Analysis of Comorbidities • Effects of comorbidities varies by FRG • RAND seeking input on recognition of possible preventable conditions • Urinary tract infections • Chronic skin ulcers • Thrombophlebitis • Acute osteomyelitis

34. Latest RAND Analysis of Comorbidities • Proposing three payment tiers for comorbidities • Highest cost comorbidity determines payment tier • Minimizes consequences of upcoding • Lacks explicit recognition of multiple comorbidities

35. Latest RAND Analysis of Comorbidities: Suggested Three Tier Model

36. Latest RAND (draft) Analysis of FRGs: Updating Patient Classification • Incorporated 1998 and 1999 data • Explored different statistical methods • Validated original CART approach • Examined different specifications of (13 item) motor and (5 item) cognitive scales • Considering deleting transfer to tub/shower from motor scale (inverse relationship to costs) • Tinkered with group splits • 95 group model, downplays age and cognitive

37. Latest RAND Analysis of FRGs: Initial AHA View • “Inherent randomness” found at case level – suggests increased role for outliers? • Analysis did not consider previous or new thinking on comorbidities • time to further rethink cognitive scale and age splits? • Suggested change to motor scale (delete tub/shower) appears to make sense • FRG cut points lack stability over time

38. Next Steps • Convince HCFA to adopt FIM • Grass roots support • Letters from Congress, especially Ways & Means and Finance committee members • Monitor HCFA progress of final rule • Assess if legislation is needed

39. Medicare Part B Therapy Study:Stephanie Maxwell, PhD, The Urban Institute2100 M Street, NW, Washington, DC 20037(202) 261-5825 Fax (202) 223-1149 smaxwell@ui.urban.org

40. THE URBAN INSTITUTE:Background: Payment and Coverage Policy • BBA 1997 • 1998: Costs minus 10 percent (facilities) • 1999+: MFS (all providers) • 1999+: $1,500 caps (implemented per facility) • BBRA 1999 • Caps suspended during 2000 and 2001 • BIPA 2000 • Caps suspended during 2002

41. THE URBAN INSTITUTE:Background: Recommendations and Studies • Coverage/payment policy • Appropriate utilization • 1998-2000 utilization comparison • Focused medical review (emphasis on SNF claims)

42. THE URBAN INSTITUTE:Study Policy Issues: Alternatives to the Caps • Fee schedule mechanisms • Cap mechanisms • Pre/post-payment medical review • Case-mix classification methods

43. THE URBAN INSTITUTE:Study Empirical Questions • Impact of fee schedule (1998 vs. 2000) • Impact of caps (1999 vs. 2000) • Patients over $1,500 thresholds • Payment distributions • Patient and provider characteristics • Prior service use, diagnoses, functional status

44. THE URBAN INSTITUTE:Study Data Sets • Medicare final action claims • 5 percent national sample • Sample size ~ 1.9 million beneficiaries • 1998, 1999, 2000 • OSCAR data (certification surveys of facilities) • Pooled sample of MCBS data

45. THE URBAN INSTITUTE:Study Deliverable I: Policy Issues Report • Background • Private-sector coverage and payment policies • Alternatives to the $1,500 caps

46. THE URBAN INSTITUTE:Study Deliverable 2: Utilization Report • Annual, beneficiary-level analysis • Comparison across 1998-2000 • Payments relative to $1,500 thresholds • Therapy type (PT, OT, SLP) • Provider type (PTIP, MD, RA, CORF, OPD, SNF, HHA) • Patient characteristics and diagnoses

47. THE URBAN INSTITUTE:Study Deliverable 3: Episodes of Care Report • Characteristics of Part B therapy episodes • Relations to prior Medicare use • Provider, therapy, and patient characteristics

48. THE URBAN INSTITUTE:Study Deliverable 4: Explore Medicare Current Beneficiary Survey • Nationally representative, annual survey • Annual sample size ~ 10,000 beneficiaries • ADL/IADL items • Survey data link to Medicare claims