MedPAC Discusses Payments, Readmissions, Quality Measures

March 19, 2018

At its March 1-2 public meeting, the Medicare Payment Advisory Commission (MedPAC) discussed post-acute care (PAC) payments, freestanding emergency department (ED) payments, the Hospital Readmission Reduction Program (HRRP), and population-based quality measures.

PAC Payments

Continuing the discussion about developing a unified payment system for PAC, MedPAC discussed how to pay for “sequential” services (when one PAC stay begins within seven days of another). The commissioners expressed interest in bundling PAC payments at the episode level to align payment incentives across the continuum of care.

MedPAC also discussed modifying hospital discharge requirements to allow hospitals to recommend higher-quality PAC providers to beneficiaries to improve outcomes and lower costs. They evaluated the pros and cons of two approaches: 1) a “flexible” approach requiring hospitals to evaluate the quality and outcomes of their local PAC providers, and 2) a more prescriptive approach in which the Centers for Medicare & Medicaid Services (CMS) would evaluate PAC providers using standardized criteria, then give hospitals lists of qualifying providers.

MedPAC will detail these approaches in its June Report to the Congress.

Payments for Freestanding EDs

MedPAC presented draft recommendations on standalone ED payments to preserve rural access to services, and to align payments to urban off-campus EDs (OCEDs) with beneficiary resource use and costs. MedPAC expressed specific concern about potential unnecessary growth in higher-cost ED visits (compared to physician office visits) in urban areas. MedPAC draft recommendations include:

  • Allowing isolated rural hospitals (more than 35 miles from another ED) to convert to standalone EDs, bill standard outpatient prospective payment system facility fees, and provide supplemental annual payments to assist with fixed costs
  • Reducing hospital outpatient payments for standalone OCEDs within six miles of an on-campus ED, either by a flat 30% or by paying the “Type B” ED (open less than 24/7) payment rate, which is generally lower than rates paid to 24/7 EDs due to reduced standby capacity, although the discount percentage varies by ED level

MedPAC expressed a preference for a flat 30% reduction in payment rates for OCEDs within six miles of an on-campus ED. MedPAC will vote on these recommendations at its April 2018 public meeting. The commissioners also expressed interest in exploring payment incentives to encourage the development of urgent care centers instead of freestanding EDs. They also addressed the recent growth of “micro-hospitals” (typically hospitals with 15 or fewer beds).

Mandated Report on Hospital Readmissions Reduction Program

MedPAC presented an updated analysis on the effects of the HRRP, which will appear in its June Report to the Congress. Among the findings:

  • Readmissions declined under HRRP
  • HRRP did not drive growth in observation stays and ED visits
  • The program did not appear to negatively affect mortality rates

While noting that HRRP has been largely successful, MedPAC suggested several refinements, including eliminating the multiplier from the penalty formula, expanding to an all-condition readmission measure to offset the costs of fixing the formula, and establishing fixed readmissions targets so the industry gets “credit” for reduced readmissions.

Evaluation of Population-Based Quality Measures

MedPAC evaluated two population-based quality measures—potentially preventable admissions and home and community days (HCDs)—stating its belief that such measures (e.g., those focused on outcomes, patient experience, and value) are important in evaluating the quality of care in the Medicare program. MedPAC generally supported the use of potentially preventable admissions, but had concerns over the limited utility of HCDs due to the lack of variation within the population for this measure. MedPAC presented the measures for general consideration by the commissioners for use in future provider performance evaluations.

For more information, including presentation slides and a meeting transcript, please visit: