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New Year Brings Old Challenges to Medicare: Cost, Quality, Value

Dec. 24, 2019, 10:41 AM

Medicare faces a transformational and turbulent new year in 2020 as the program moves to shore up its ailing finances and expand opportunities for providers to coordinate patient care.

In that vein, the Centers for Medicare & Medicaid Services will try—again—to cut Medicare payments to off-campus, hospital-based clinics next year. While a new payment system for home health agencies and five proposed new payment models for kidney-care doctors will accelerate traditional Medicare’s move to value-based care.

The private health plans that provide Medicare coverage can expand their supplemental benefit offerings next year to include services like home-delivered meals, family counseling and even pest control services. And the Health and Human Services Department expects to complete its first-ever overhaul of two major health-care anti-corruption laws in 2020.

The public comment period on revamping the Stark law, which prohibits physician self-referrals, and the federal anti-kickback statute, which bars efforts to reward business referrals in federal health programs, closes on Dec. 31. About 100 comments have already been received.

“My favorite one, thus far, says ‘this rule rocks,’ so we’re pretty excited,” said Kimberly Brandt, principal deputy administrator for operations and policy at the CMS, “The goal is to get both of them out next year,” she added.

Along with improving patient care, the upcoming initiatives aim to reduce program expenditures before millions of aging baby boomers are expected to double Medicare spending to more than $1.5 trillion by 2028.

Tackling Kidney Care

Bending the cost curve, however, will require taming one of Medicare’s biggest cost drivers: the $114 billion in annual spending for kidney disease. Medicare spends roughly $90,000 a year for each dialysis patient.

But more beneficiaries would get cheaper in-home dialysis treatments and better access to kidney transplants under five new incentive payment models expected to begin in 2020.

The mandatory End-Stage Renal Disease Treatment Choices Model would base physician payments on the number of Medicare beneficiaries who receive dialysis treatments at home rather than at a dialysis center. The payments would increase if these patients receive kidney transplants. Providers and doctors selected to participate in the payment model will manage about half of adult Medicare patients diagnosed with kidney failure.

The CMS is also planning four optional payment models in 2020 to help providers cut the cost of care while improving quality for patients with late-stage kidney disease and kidney failure. These models are designed to delay the need for dialysis and encourage kidney transplants.

Nearly 100,000 Americans need a kidney transplant and “each month, 3,000 people are added to the kidney waitlist and hundreds pass away while waiting for a transplant. This is unacceptable,” said Joe Grogan, director of the White House Domestic Policy Council.

Home Care Payments Updated

Home health agencies will also experience a Medicare payment upheaval when the new Patient-Driven Groupings Model, or PDGM, is implemented on Jan.1. It is designed to curb unnecessary therapy services that drive up Medicare reimbursements. Instead it sets payments based on the type and severity of patient ailments.

Smaller, rural, nonprofit, and facility-based home care agencies are expected to see payment hikes under the new system. So will those that provide more nursing services. But larger, freestanding, for-profit and urban home health agencies—and those that provide more therapy-related services—will likely see less money.

“There are agencies that will likely see a significant reduction in income with those therapy [bonus] payments going away,” said Robert Markette, an attorney in Indianapolis with the Hall Render law firm.

The new payment system is similar to the Patient Driven Payment Model, or PDPM, that the CMS implemented for nursing homes in October. Experts say both drive toward the creation of a unified payment system for post-acute care under Medicare.

The new system could drive some home health agencies out of business in the first quarter of the new year. That’s because it reduces upfront payments to providers from 50% to 60% of a final Medicare claim to only 20% in 2020.

Smaller agencies with tight margins could find it harder to make payroll under the reduced payments. Medicare typically takes two to four weeks—and sometimes longer—to reimburse providers after a claim is submitted.

Tim Ashe, chief clinical officer at WellSky, advises agencies to audit patient records to see what their Medicare payments would look like under the new system.

“We would certainly want an organization to dig in on those details if they haven’t already done so,” Ashe said. “Particularly those that provide a lot of therapy services.”

New Benefits for Medicare Advantage

The new year will also see hundreds of Medicare Advantage plans offer expanded supplemental benefits for beneficiaries with chronic conditions.

By helping patients with social problems that affect their health, plans hope to lower Medicare spending by avoiding hospitalizations and emergency room visits. To be eligible for the services, enrollees must have at least one of 15 chronic conditions that 73% of Medicare Advantage patients suffer from.

The new benefit offerings for 2020 can include healthy meals for patients with special diets, minor home modifications, mobility aids for people with Parkinson’s disease or dementia, and even air conditioners for people with congestive heart failure and asthma.

In 2019, no Medicare Advantage plans offered more than one supplemental benefit. Next year, 175 plans will have multiple offerings, according to a recent study from Duke University’s Margolis Center for Health Policy.

“The bar is set high for offering new supplemental benefits but progress is being made,” Robert Saunders, research director at the Margolis Center and a study co-author, said in a statement. “Designing and implementing new supplemental benefits, including for patients with serious illness, requires rigorous evidence for how they will impact clinical care quality, the health and quality of life of enrollees, and overall health care costs.”

Second Crack at Site Neutral Pay

Medicare in 2020 will try to reboot a 2019 legal battle with the hospital industry over its site-neutral payment policy.

The Trump administration is appealing to the U.S. Court of Appeals for the District of Columbia Circuit a decision that scrapped a CMS payment policy that cut Medicare reimbursement for care provided at off-campus, hospital-based clinics.

The U.S. District Court for the District of Columbia held that the site-neutral policy exceeded the CMS’ statutory authority by lowering the hospitals’ payment rate to the amount paid for services provided in doctor’s offices.

Melinda Hatton, general counsel for the American Hospital Association, told Bloomberg Law in a statement that she’s confident the “appeals court will affirm the district court’s decision confirming congressional intent to protect these hospitals from punitive reductions in payment.”

The site-neutral payment policy has been supported by many health-care experts. Katherine Hayes, director of health policy at the Bipartisan Policy Center, said recently that it was “pretty egregious” that hospitals buy “physician practices and bill for the same services at the hospital outpatient rate, in some cases, tripling their revenue.”

To contact the reporter on this story: Tony Pugh in Washington at tpugh@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com; Andrew Childers at achilders@bloomberglaw.com

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