The IMPACT Bill, the BACPAC Proposal, and Why It Matters Where PAC Savings Go

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by Anne H. Montgomery and Joanne Lynn, MD, MA, MS

Congress is gearing up to put a legislative glide path in place that is intended to culminate in major reform of Medicare’s post-acute care (PAC) payment system. Following several months of soliciting and reviewing comments on a discussion draft, the “Improve Medicare Post-Acute Care Transformation Act” (H.R. 4994/S. 2553) was introduced on June 26. Sponsored by Sens. Ron Wyden (D-OR) and Orrin Hatch (R-UT), together with Reps. Dave Camp (R-MI) and Sander Levin (D-MI), the IMPACT proposal (https://beta.congress.gov/ search for S.2553) is believed to have good odds of being enacted during the 113th congressional session.

One of IMPACT’s primary goals is to establish a system of uniform assessment in the PAC sector (or perhaps more accurately the “after- hospital” sector) along with improved quality measurement. This information, which would be transmitted to CMS and available for analysis and research, would be used to help redesign payments across skilled nursing facilities, inpatient rehabilitation facilities, long-term care hospitals and home health agencies, with recommendations due from CMS and the Medicare Payment Advisory Commission by 2022.

“Without comparable information across PAC settings, policymakers and providers cannot determine whether patients treated and the care provided in different settings is, in fact, the same or whether one PAC setting is more appropriate,” a summary of the bill notes.

“Absent this information, it is difficult to move forward with PAC payment reforms.”

This is true enough: Clinicians and thoughtful experts knowledgeable about the care of older adults have advocated a uniform assessment for several decades, and having a high-quality, standardized tool in hand would enable better prognostication and decision support.

But there are other factors that could heavily influence the way that PAC reform played out. One is the “Bundling and Coordinating Post-Acute care Act of 2014” (BACPAC) bill (https://beta.congress.gov/ search for H.R.4673) introduced on May 19 by Rep. McKinley (R-WV) and Tom Price (R-GA). As proposed, the policy would give control of PAC services to a PAC coordinator – which could be a hospital, health insurance issuer, third-party benefit manager or PAC provider; no government entities or locally-managed coalition efforts are envisioned. PAC coordinators would be given full authority to authorize, deny and coordinate all PAC services for 90 days post-discharge. These services are defined as post-hospital extended care services, home health services, inpatient services provided in a rehabilitation facility, inpatient hospital services provided by a long-term care hospital, durable medical equipment, outpatient prescription drugs and biologicals, and skilled nursing facility services. Physician services and hospice are not included. Standardized assessment is called for, but there is no mention of the information being transmitted to CMS.

Starting in January 2016, PAC coordinators receiving a single payment from the HHS Secretary for PAC services would manage PAC services within a designated “PAC area” (no standardized geographic definition of these areas is provided), and would reimburse “PAC providers” (providers or suppliers furnishing PAC services) at current rates.

After January 2019, PAC coordinators would be empowered to negotiate rates and savings targets with PAC providers. Under the terms of these negotiated agreements, PAC coordinators would keep up to 70% of any savings realized, with 10% or more to PAC providers, 10% or more to the PAC physician, and 10% or more to the discharging hospital. Although unlikely to be enacted in this Congress, BACPAC will probably be reintroduced in the 114th session. And while it may be financially attractive for certain providers, beneficiaries would not see financial gains, and the benefits from better “navigation” of services are not well established. Nonetheless, unless careful attention is paid to the implications of the bill, it is even possible that some of the proposed reforms could be implemented administratively.

But the most interesting issue is where PAC dollars that are saved will go before any of the proposed legislative reforms culminate in a rebased PAC financing system. In the IMPACT bill, financing reforms are more than seven years away. This provides a window of opportunity for capturing large savings in this sector, now that research and private companies has established that substantial efficencies in the PAC sector are feasible.

This raises two related questions: Are there models already in use that are capturing PAC savings, and if so, where are the savings going? The answers are “yes” and “to private investors.” More specifically, evidence-based proprietary protocols are now being used by some risk-bearing contractors and managed care plans to significantly reduce PAC expenditures (http://healthaffairs.org/blog/author/jlynn/). Under these arrangements, savings from taxpayer-financed PAC services are not being reinvested in further improvements, but rather are being funneled via contractual agreements directly into private pockets.

Business as usual, you say? Classic American capitalism? Certainly. But for policymakers and other guardians of the public purse and the public welfare, the merits of this approach may best be examined in a larger framework: the future of the U.S. health and long-term care systems after 2020, when the largest generation of older adults in U.S. history will rapidly drive up demand for a mix of services that are aimed at controlling chronic conditions and mitigating the impact of functional disability. Since evidence suggests that about 45% of the roughly 23% of total Medicare dollars that are spent on PAC services can be harvested
(http://healthforum.brandeis.edu/meetings/materials/2014-18 march/naviHealth.Scully.pdf), this represents an important opportunity to have a robust policy discussion about whether PAC savings — or a portion of them – could be set aside to re-engineer the health, PAC and post-PAC (i.e., long-term care) systems into better-organized integrated care systems.

The sheer size of the possible PAC savings that are available to possibly be captured over the next seven to 10 years – roughly 10% of all Medicare spending – makes this a particularly important case to debate thoroughly – rather than merely standing by and letting the money quietly disappear.

The reality is that today, we are still billions of dollars away from having the necessary infrastructure to grow our modestly-sized coordinated care and shared savings models into the stable integrated care system that will be needed for tomorrow’s large cohort of older adults. For American health care to have become so chaotic and poorly designed that private companies can design ways to pull about 10% of Medicare spending out of services and mostly into profits points out just how poorly we have built our care system for complex chronic conditions.

Some private gain using public dollars may be necessary to catalyze reforms of the PAC sector. However, the size of the looming potential loss for the Medicare Trust Fund is stunningly large, especially when the services provided are primarily decision support and navigation. If, instead, the strategy can be shifted to reinvesting a hefty portion of realized savings in care systems that are deliberately designed to deliver consistent and reliable supports for frail elders and their families, while also reducing their overall health care costs, our future will look very different.

One such comprehensive and community-focused system, the MediCaring model, has been developed by Altarum’s Center for Elder Care and Advanced Illness [now Program to Improve Eldercare]. Others may emerge from the dual eligibles demonstration and ongoing research efforts, while smaller-scale plans such as PACE may devise successful expansion strategies. These models spring from efforts to serve the target population, rather than opportunistically attending only to the happenstance period after hospitalization.

Making these and other high-quality comprehensive models larger and economically viable and sustainable – capable of both driving down unnecessary utilization while improving outcomes — will take ingenuity and innovation, significantly more efficient deployment of services and workforce, and greater flexibility in how existing financial resources are used. Given the likelihood that Congress will not want to make substantial resources for further reforms available in the form of new programs and large grants, this is an important time to think carefully about how greater efficiencies in the PAC sector can both be reliably achieved and how any resulting savings can be best leveraged to build the care system we need to handle the demands of the “age boom.”

key words: Joanne Lynn, IMPACT, BACPAC, MediCaring model, congress

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