While members of a congressional Medicare adviser agreed on the majority of Medicare payment policy updates for 2021, including a pay cut for home health agencies and inpatient rehabilitation facilities, there was disagreement among the members about how a payment increase for hospitals should be structured.

During a Dec. 5 meeting, the majority of commissioners for the Medicare Payment Advisory Commission supported decreasing 2020 payment rates for home health agencies and inpatient rehabilitation facilities in 2021 by 7% and 5%, respectively. The commission also supported a 2% payment increase for long-term care hospitals in 2021.

MedPAC is a Medicare adviser for Congress and delivers policy and payment recommendations in March and June reports; it does not have legislative authority.

Seven payment draft recommendations were reviewed by the commission Dec. 5. Final recommendations will be voted on during the MedPAC's January meeting and then included in the March report.

Debating hospital pay increase

The commission heard a draft recommendation that would increase 2020's base payment rate for acute care hospitals by 2% in 2021. An additional 0.8% increase of inpatient and outpatient payments to hospitals would be included if Congress enacts the Hospital Value Incentive Program, an incentive payment model previously recommended to Congress by MedPAC.

Nearly every payment update was agreed upon by the commissioners. However, questions were raised regarding the structure of the payment update for hospitals.

Warner Thomas, commissioner and president and CEO of Ochsner Health System, a New Orleans-based health system, said due to the small margins of hospitals compared to other facility types, the full payment update should total 2.8% and also include an additional payment for the incentive program.

Keeping the payment update low would "exasperate" issues of physician and industry consolidation, according to Thomas.

Francis Crosson, chairman of the commission, said keeping the 0.8% increase separate will incentivize industry members to advocate for the adoption of the Hospital Value Incentive Program. However, Thomas argued that a full 2.8% payment update should be made because his confidence that the model will be adopted is "essentially zero."

Medicare spending in the fee-for-service system for hospitals totaled about $201 billion in 2018, going to about 4,700 facilities, according to data presented by MedPAC.

The commission also supported increasing the 2020 payment rate for long-term care hospitals by 2% in 2021. Medicare spending for long-term care hospitals totaled $4.2 billion in 2018, going to 374 facilities and covering about 102,000 cases, according to MedPAC data.

Pay cut for home health agencies

Commissioners supported reducing the 2020 Medicare payment rate for home health agencies by 7% in 2021.

Evan Christman, a senior analyst for MedPAC, said during his presentation that Medicare reimbursements for home health agencies continue to be too high, resulting in agencies netting substantial Medicare margins. To address this issue, Christman said MedPAC has recommended a pay decrease for home health agencies multiple times.

Agencies' Medicare margins were 15.3% in 2018, with "efficient" agencies posting a Medicare margin of up to 23%, according to Christman. Average Medicare margins are projected to rise from 15.3% in 2018 to 17% in 2020.

Christman said the implications of the 7% payment decrease in 2021 should not impact beneficiaries' access to care, but it may increase cost pressure for certain providers.

James Mathews, executive director of MedPAC, said Christman's 17% projection for Medicare margins in 2020 may even be higher. Due to this increase, multiple commissioners said they would even support a 10% Medicare payment decrease.

Medicare payments totaled $17.9 billion in 2018 and were paid to 11,556 agencies, according to Christman.

Definitive Healthcare LLC, a data and analytics organization focused on healthcare providers, recently highlighted the growing home health space in a Dec. 3 survey of 159 industry executives. About 43% of respondents said they plan to increase offerings in the next two years, with telehealth participation nearly doubling, according to the survey.

Along with a decrease for home health agencies, the commission supported decreasing payments for inpatient rehabilitation facilities in 2021 by 5%. Jamila Torain, a MedPAC policy analyst, said aggregate Medicare margins for inpatient rehabilitation facilities has grown to 14.7% in 2018 from 8.6% in 2010.

Decreasing the payment rate would lower Medicare spending without negatively impacting beneficiaries, according to Torain. Commissioners also supported recommending focused medical record reviews for facilities that have unusual patterns of case mixing or coding, a concern highlighted by Torain during the presentation.