Authored by: Brian Ellsworth, MA, Director, Payment Transformation, Health Dimensions Group

The uncertainty about the viability, scope, and timing of the repeal and replacement of the Affordable Care Act (ACA) has left many providers wondering whether it is safe to stay in port, or to continue out to sea on their journey of transformation. Here is what we know now, including some late-breaking information.

Breaking Up Is Hard to Do. By necessity of the budget reconciliation rules that limit changes to tax policy and revenues, the ACA repeal and replacement discussion has been limited to changes to the individual insurance market and the Medicaid program. For a job that was already not very easy, these legislative realities are causing further challenges. Chief among them is that the Congressional Budget Office (CBO)—the official scorekeeper—has stated the American Health Care Act currently moving through Congress would remove 22 million folks from the ranks of the insured, and raise premiums on workers older than 50. Some of these issues are fixable, but will now require careful tweaking and political arm twisting. How fast, and whether, some of that can be worked out will be known in coming weeks.

Medicaid Challenges and Opportunities. The proposal to move Medicaid to a per capita cap funding model (sometimes referred to as block grants) has major implications for state Medicaid programs. Over time, states would potentially face funding shortfalls relative to current funding levels, but may also be given the flexibility and incentive to shift funding to new delivery and payment models. Long-term care providers that offer a continuum of services and are able to create integrated, value-based care with an emphasis on community-based services would be the most well positioned to thrive in an environment where states are incentivized to innovate. Freestanding facilities will need to find like-minded partners to pursue clinical and financial integration strategies in order to achieve scale and vertical integration.

Medicare Not in Play—Yet. Meanwhile, the legislative proposals for repeal and replacement of the ACA have not directly tackled changes to the Medicare program to date. Issues like the fate and funding levels of the Center for Medicare & Medicaid Innovation (CMMI) are likely to get addressed through the budget process and administrative rulemaking, causing some to wonder whether the pace and scope of Alternative Payment Models (APMs), such as ACOs and episodic bundling, will slow down. For a variety of reasons, including ongoing federal deficits and the need to have a plethora of Advanced APMs under the new physician payment rules, there will be ongoing pressures to achieve savings through new payment models.

A Case in Point: Mandated and/or Voluntary Bundling? In the waning days of the Obama administration, rules were finalized to expand mandatory episode payment models (EPMs) to include: hip fractures in the 67 markets; heart attacks and bypass surgery in 98 markets; and cardiac rehabilitation incentive payments in 90 markets—all with a tight implementation date of July 1, 2017. Citing the new administration’s directive to review all new regulations not yet implemented, the Centers for Medicare and Medicaid Services (CMS) just announced a three-month delay in the implementation date of these programs to October 1, 2017, along with a new 30-day opportunity for public comment. Although some pundits thought the rule would be repealed altogether, it is important to note that CMS extended the implementation date by the shortest plausible duration. Now, affected stakeholders will have an opportunity to weigh in on the record. One possibility is that these EPM models will remain, but be shifted to voluntary models. Several times over the last year, CMS has expressed its desire for another round of voluntary bundling in 2018, so stay tuned.

A Glimpse into Medicare’s Future. The Medicare Payment Advisory Commission (MedPAC) recently issued its annual March report with recommendations to Congress. This report typically provides an important signpost to where Congress and CMS might be going. MedPAC continues to see double-digit margins for post-acute providers, which resulted in recommendations for 2018 to freeze skilled nursing facility (SNF) and long term care hospital (LTCH) payment rates, as well as to reduce home health agency (HHA) and inpatient rehabilitation facility (IRF) payments by 5 percent. Some of the additional recommendations affecting post-acute care are to:

• Revise the SNF payment system to better align payments and costs; and issue a report evaluating those changes by 2020.
• Rebase HHA payments in 2019 and 2020, in addition to the rebasing authorized by the Affordable Care Act; concurrent with this rebasing, CMS should also eliminate number of therapy visits as a factor in setting HHA payments.

MedPAC noted that the research into payment refinement for SNF and HH prospective payment systems (PPS) is complete and should be implemented without delay. For instance, a SNF PPS workgroup has, for several years, been reviewing options to more accurately pay for therapy and non-therapy ancillaries. MedPAC sees payment refinements as an important next step to a unified payment system across post-acute care.

So How Do You Prepare for All of These Possible Changes? Keep one eye on the here and now, while also planning for a value-based future. Among the here-and-now items are: focus on your 30-day readmission rate (the performance period for readmission penalties for SNF VBP started January 1, 2017, and hospital readmission penalties have been happening for some time); make operations as efficient as possible; and understand shifting market patterns. Planning for the future should include identifying value-based partners and considering directly taking risk if not done so already. Call Health Dimensions Group today—763.537.5700—to learn how to prepare for the here and now, as well as the upcoming changes.