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AAPM&R Rochelle Archuleta – AHA Policy San Diego, Nov 20, 2008. Regulatory Update The Medicare Environment Potential for Health Reform High Cost Patients IRF Update Post-Acute Update. A Medicare Scan. The Medicare Scene. Beneficiary Growth = Cost Growth.

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Rochelle Archuleta – AHA Policy

San Diego, Nov 20, 2008

Regulatory Update
  • The Medicare Environment
  • Potential for Health Reform
  • High Cost Patients
  • IRF Update
  • Post-Acute Update
a medicare scan
A Medicare Scan

The Medicare Scene

beneficiary growth cost growth
Beneficiary Growth = Cost Growth

Medicare Enrollment To Grow Even Faster

Source: MedPAC Data Book, June 2008

all types of health spending growing
All Types of Health Spending Growing

Source: MedPAC Data Book, June 2008

major segments of medicare growing
Major Segments of Medicare Growing

Source: MedPAC Data Book, June 2008

A new President is chosen

But, the new administration faces serious budget challenges

the obama health plan
The Obama Health Plan
  • Mandated coverage for kids
  • Pay-or-play for employers
  • New public plan offered
  • No tax credits/changes
  • Expansion of Medicaid/SCHIP
  • Invest $10 B in HIT
  • Cost: estimates from $50-110b/year
key challenges for new president
Key Challenges for New President
  • Many immediate challenges with high ticket fixes
    • Two wars – national security
    • Real Estate meltdown / Wall Street Woes
    • Record-setting Deficit
    • Major Industries may collapse…automakers
  • Health Care Noted as a Top Priority
    • November 7 Press Conference
    • Transition Team in place and accepting resumes at
    • Promised expanded coverage during campaign
president elect obama
President-Elect Obama

What’s First?

  • Quick victories?
    • SCHIP
    • Start small, build up confidence
  • Tax, Energy, or Health?
    • Economy eclipses everything else; then war
  • How to avoid Democratic overreaching?
    • Avoid Clinton missteps
aha response to election
AHA Response to Election
  • Looking forward to working with new administration
  • New Tone
  • More bipartisan approach
  • Our current system is a non-system with 46 million uninsured
  • Glaring need for reform
    • We can’t afford not to reform the system
    • SCHIP extension expires Mar 31 2009
    • Doc fix expires Dec 2009
health reform tipping point
Health Reform: Tipping Point?

Key Factors in 1992

  • Affordability concerns
  • Rising numbers of uninsured
  • Middle-class voters concerned about losing coverage
  • Democrats intend to make priority issue

New Drivers

  • Growing public dissatisfaction… changing consumer expectations
  • Recession – 1.2 million job losses in 2008
  • Employer terminations of retiree coverage
  • Increased demand for services – Baby Boomers
  • Fragile health care infrastructure
67 favor coverage over tax cuts
67% Favor Coverage over Tax Cuts

Is it more important to provide health care coverage for all Americans or hold down taxes?

aha prepares for health reform
AHA Prepares for Health Reform

AHA Members set the course:

2-year discourse on health reform

Be prepared for political change

Work in coalitions beyond hospitals

Use hospital expertise to develop key elements of reform

Des Moines, July 2008

Harrisburg PA, Aug 2008

health for life
Health for Life
  • Hospitals + major stakeholders
    • Business; Unions; Patient Groups; Insurers
  • Goes beyond coverage
  • Key Principles
    • Coordinated care…chronic care management
    • Quality…pay for performance
    • Clinical integration
    • IT standards for interoperability
    • Comparative effectiveness
    • Insurance simplification
    • Alternative liability reforms
  • Details at
  • Gain sharing:Sharing cost savings between hospitals and physicians through specific actions to improve efficiency of care.
  • AHA Task Force:Modernize Gain Sharing

Amend federal laws on hospital-physician relationships to:

    • Allow incentives to improve access, safety, effectiveness, patient-centeredness, timeliness, efficiency or equity (From IOM Crossing the Quality Chasm report).
    • Achieve improvements in delivery system even with no immediate savings.
    • Sustain access to essential services that are essential, such as trauma and EDs, support community outreach, care for the uninsured, and other hospital operations that require physician support.
    • Integrate clinical care across providers, across settings, and over time.
    • Integrate IT systems and technology.
    • Enhance productivity or achieve other efficiencies.
    • Establish simpler, consistent rules for hospital – physician relationships
    • Enable hospital-physicians to contract w/health plans & purchasers as a single unit
  • AHA Letter to CMS(Aug 2008): RecommendsStark Law changes on hospital-physician incentive and shared-savings programs.
aha strategy
AHA Strategy


  • Keep focus on reform
  • Coalitions
  • Provide leadership/expertise
  • Offer solutions


  • Frame cost/value issues
  • “What’s Right with Health in America” Project
    • Anticipate criticisms; rapid response
  • Prevent federal budget cuts
connecting the dots
Connecting the Dots
  • Major stakeholders in support of

care coordination due to wide

recognition of need to:

    • Improve quality


    • Cut costs
  • To meaningfully achieve these goals,

Medicare must address chronic disease population.

  • An episode of care approach also contributes to these goals.
on the table in 2009
On the Table in 2009
  • Likely 2009 Health Reform/Cost Saving Measures:
    • Care Coordination for chronic illness
    • Episode Payment
    • Bundled Payment
    • Avoidable Re-hospitalizations
    • Return of SNF+ Payment Cuts
    • Budget cuts by Congress
      • BNA, Nov 17: Congressional Democrats Signal Intention to Enact Deep Medicare Managed Care Cuts
  • Senator Baucus
    • Nov 12: Release H Reform blueprint
  • Senator Kennedy
    • To release plan by inauguration in Jan.
health reform in 2009 2010
Health Reform in 2009? 2010?

The Baucus Plan

  • Major Provisions
    • Expand SCHIP
    • Overhaul physician payments under Medicare,
    • Reduce Medicare Advantage payments (paid 13% more than FFS Medicare)
    • Cuts to various Medicare providers
  • Sample of Medicare system reforms
    • Gradual transition to more pay-for-performance, including docs;
    • Align hospital and physician quality goals;
    • Comparative effectiveness research;
    • Transparency for physician - healthcare manufacturer relationships;
    • Build on Physician Quality Reporting Initiative for more frequent, more aggressive recertification and outcomes assessment by medical boards;
    • Encourage collaboration and accountability among physician offices, inpatient hospitals, post-acute care settings, and others.


chronic disease patients
Chronic Disease Patients

Chronic disease patients using disproportionate share of resources

  • 15% of Medicare FFS account for 75%

of total Medicare expenditures per year

  • Yet, Medicare does not cover care

coordination for these patients

  • Patients bouncing around health system

and receiving fragmented care

  • Patients unable to manage care
    • Multiple conditions, specialists, meds, etc.
  • Post-acute usage up from 1997-2006 (AHRQ, Oct 08)
    • 53% increase in HH use (1997-2006)
    • 30% increase in SNF + other post acute svcs
trillions spent on chronic disease
Trillions Spent on Chronic Disease

United States:

  • 1 out of 2 Americans have at least one chronic disease (2005)
  • Chronic diseases account for 70% of all deaths
  • Chronic diseases patients drive 75% of $2 trillion in annual costs
  • Diabetes: Direct and indirect costs of $174 billion/year.
  • Arthritis: Estimated medical costs of nearly $81 billion; estimated total costs (medical + lost productivity) of $128 billion.
  • Smoking: Estimated direct and indirect costs exceed $193 billion/year.
  • Heart Disease and Stroke: Projected to be $448 billion in 2008.
  • Obesity: Estimated total costs of nearly $117 billion in 2000.
  • Cancer: Estimated direct medical costs of $89 billion/year.

SOURCE: U.S. Centers for Disease Control

oig on consecutive stays
OIG on “Consecutive Stays”
  • June 2007 Report on high-utilization Episodes of Care
  • Approx 500,000 Consecutive Stay Sequences in CY 2004
    • Definition: Cases with 3 or more inpatient and SNF stays with admissions within 1 day of preceding stay, during CY 2004.
  • Case Review: 3 docs assessed med. necessity of 140 sequences
  • Findings for 2004 Medicare payments (extrapolated fr sample)
    • $4.5b for consecutive stay sequences associated with fragmentation or quality problems; 35% of cases had these problems
    • $1.4b for medically unnecessary care
    • $3.1b for stays with insufficient documentation
    • In addition to IPPS and SNF care, patients received
    • These patients received 2 million individual stays
      • Inpatient, IRF, SNF, Psych, LTCH, CAH, Other
  • Recommendation:
    • Provider education on Medicare coverage
    • More Medical Necessity review


episode payment
Episode Payment
  • Major Paradigm Shift
    • Would move from silos to episode framework
  • Key Questions about Episode Payments
    • Who defines the episode?
    • What is included in the episode?
    • How long is the episode? 15 days? 30 days? 6 months?
  • Today, no incentives for
    • Care management during transitions from one setting to the next
    • Care coordination among multiple providers treating the same beneficiary.
  • Many CMS demos exploring this approach
  • Bundled payment being discussed as likely method for paying for episodes of care
  • Benefits:
    • Encourage providers to coordinate care;
    • Reduce fragmented care for patients; and
    • Control volume and cost of care during episode.
  • Key Questions on the Bundle:
    • Who controls payment? Real or virtual bundle
    • Which conditions? Chronic disease only?
    • Which providers?
      • MedPAC initially looking at hospital and physicians
      • Include Post-acute?
    • Link to P4P?
cms demos on care mgmt
CMS Demos on Care Mgmt
  • Many CMS Demonstrations
    • Medicare Care Management Performance Demonstration. Bonus payments to docs using IT to manage care for chronically ill pts.
    • Care Management for High Cost Beneficiaries Demonstration.Intensive care management for benes with one or more chronic diseases.
    • Medicare Medical Home Demonstration. Physicians paid to provide basic or advanced care management. 3 yrs; 8 states.
  • Demos to make case for Medicare coverage for care management
    • Requires Congressional Approval
aha care coordination task force
AHA Care Coordination Task Force
  • Convened in Summer 2008
  • Care Coordination Definition:Individualized, integrated, interdisciplinary management of wellness and health services across settings and over time, that engage, educate, and support patient and family in their efforts to pursue health.
  • Task Force: Policymakers need strategies to rapidly deploy
    • Value based purchasing – Bundled payments
    • Accountable care entities – Avoidable readmissions
  • Recommendations:
    • Speed the adoption of health IT
    • Incentivize and reward care coordination
    • Remove legal and regulatory barriers to care coordination
    • Enhance provider education and training
avoidable readmissions
Avoidable Readmissions
  • Significant spending: $15b per year (18% or benes)
  • Some hospitals already taking proactive steps
  • Proposals use Episode framework
  • MedPAC Recommendation:
    • Report readmissions rates to hospitals for 2 yrs, then publicly
    • Reduce payments for hospitals with relatively high rates
    • Allow for hospitals and physicians to share accountability and incentives/penalties.
  • CMS Recommendation:
    • Reduce DRG payment for avoidable readmissions
    • Hospital payment cut based on facility outcome measure/s
    • Publicly report hospital readmissions rates
  • Key Specs Unknown:
    • Same diagnosis? – Episode timeframe?
    • Same hospital? – Which claim is adjusted?
    • Transfer patients? – “Potentially avoidable” definition
readmissions from snfs
Readmissions from SNFs
  • MedPAC October 2008
  • Concerns:
    • Frequent re-hospitalization from SNFs (no payment disincentive)
    • Frequent readmissions to SNFs
      • Are patients being re-qualified for Part A SNF care?
  • Analysis
    • 2+ hospital to SNF transitions in 2-year window (2004-06)
      • 1/3+ of cases
    • Majority of hospital readmissions were “potentially avoidable
      • “Potentially avoidable:” Certain conditions shown to potentially avoidable, e.g., sepsis, UTI, electrolyte imbalance, etc. (Univ of CO)
  • Possible Policy
    • Payment cut for facilities with excessive rates of “potentially avoidable” hospital readmissions
      • Cut SNFs or hospitals?
post acute discharge demo
Post-Acute Discharge Demo
  • Deficit Reduction Act of 2005; report to Congress in 2011
  • Collect, compare consistent health and care data.
  • Continuity Assessment Record and Evaluation (CARE) 25-page tool.
  • CARE tool to be used in STACHs, HH, SNF, IRF & LTCHs
  • Approx 150 providers in 10 markets
    • Collect data through CARE assessments & staff time logs
  • Better information on the acuity of Medicare beneficiaries
    • Uniform patient assessment and quality measurement
    • Refine case mix measurement
    • Information on regional variations in case-mix; and
    • Ultimately refine Medicare payment systems.
  • May lead to unified post-acute payment system
  • CARE demo to be used in CMS’ LTCH criteria study
impact for hospitals doctors
Impact for Hospitals & Doctors
  • Growing focus on episodes of care, bundled payment, and care coordination place greater spotlight on:
    • Hospital case management
    • Discharge planning
    • Physician orders at admission and discharge
  • CMS has little awareness of these functions.
    • E.G. 2006 and 2007 Proposals on discharge notification show basic misunderstanding of:
      • Hospital vs. physician role in patient care decisions, and
      • Timing and physician role in discharge planning.
the 60 rule
The 60% Rule

MMSEA Legislation, Dec 2007

  • 60% Rule Finalized by Congress in
    • Long-fought battle
    • Success due to sustained, industry-wide effort
    • Comorbidities provisions also made permanent
    • Medicare payments to IRFs frozen for 18 months (Apr 08 to Sept 09); $40m cut for FY 2009.
    • 60% for cost report periods beginning on or after July 1, 2005
  • CMS Report to Congress due June 2009
    • Topics: 75% Rule impact on access; 75% Rule alternatives/refinements
    • RTI to conduct this study -- yet another post-acute study for RTI
    • Expected to issue an interim report next summer;
      • to be followed by new analysis?
    • CMS only now meeting with RTI for a kick-off meeting
irf update37
IRF Update

Physican Fee Schedule Final Rule for CH 2007

  • Changes definition for therapists
    • Transmittal 88 took effect Jan 1, 2008
    • MedLearn Matters Article
  • CMS institutes consistent standard for Parts A & B
  • IRFs:
    • No longer able to bill therapy provided by PT aides
    • Therapy by PT aides no longer counts toward the 75% Rule
  • IRF Field to collaborate to fight IRF application
    • IRFs provide hospital-level, integrated therapy
    • IRF PPS structure includes aides – change raises IRF costs
    • Change should be subject to IRF PPS rulemaking
irf review by cms
IRF Review by CMS
  • 2009: Multiple CMS contractors reviewing IRFs
    • RAC, FI, Carrier, MAC, PSC (to become ZPIC), OIG, CERT
  • FI/MAC reviews reviewing IRFs in 33 states
  • Aggressive reviews/denials likely to cause major problems in 2009
  • Hospitals must be organized and diligent in appealing Medicare denials
  • AHA resources:
    • AHA RAC Education Series
    • Pending member advisories on
      • Medicare Appeals
      • Appeals Strategies
      • Hospital Review by FIs
ca rac experience
CA RAC Experience
  • Significant IRF denials
    • 94% Medically unnecessary
  • Initially no medical director
  • Case example: 500 reviews → 495 denials
  • CMS Reviewer: 40% error rate for IRF reviews
  • Training on IRF criteria in January 2008
  • 5-6,000 denials re-reviewed (~25% reversed)
  • Significant appeals activity still in process
  • PRG Schultz not selected as a national RAC
    • Formally protesting CMS’ selection of other bidders
  • More RAC information at
    • Attend 1:30 session on RACs! (# 313)
snf pps for fy 2009
SNF PPS for FY 2009
  • CMS FY 2009 Final Rule increases payments by $780 million
    • 3.4 percent payment update
  • CMS postpones proposed $770m cut to adjust for greater use of new RUGs
  • Major Changes for 2010
    • STRIVE data to update elements of RUGs
    • MDS 3.0 replaces current pt. assessment tool
ltch pps
  • Third CMS study by RTI underway
    • Field working to collaborate on mirror study
  • 2009: $110 million increase over 2008 Medicare payments; $39,1146.36 standard payments
  • Medical Review transitioning from QIOs → FIs
  • MMSEA Legislation
    • 3-years of relief on 25% Rule
    • 3-years of relief on SSO cut
    • 3-year moratorium on new facilities and beds
    • 3-year postponement of one-time cut
    • New patient/facility criteria added
    • 1 Qtr payment freeze
    • Additional study needed
  • Congress may revisit technical corrections to MMSEA to extend 25% Rule relief and moratorium exceptions to all LTCHS
therapy caps
Therapy Caps
  • Congress extended T Caps exceptions to Dec 31, 2009
  • CY 2008 caps
    • PT/ST: $1810
    • OT: $1810
  • Permanent fix too costly
  • Caps reduced utilization by 15% from 2005 to 2006
    • REMEDY: Savings help make case to make exceptions permanent
  • T Caps Exceptions:
    • Non-Part A SNF patients may obtain medically necessary therapy services that exceed the caps in hospital outpatient department
    • In other settings, outpatient therapy services in excess of the caps are not covered, and the therapy provider may charge for those services. 
  • CMS – two studies underway to develop alternatives
    • CSC – short-term study
    • RTI – long-term study
    • Hospital carve-out to be eliminated
  • CMS was phasing in DMEPOS competitive bidding
    • July 2008: 10 major markets
      • 325 of 1,005 bidders awarded
    • Additional 70 sites planned for Jan 09
    • Projected to “save” Medicare $3.5 billion in 1 year; overall cut of 9.5%
    • New vendor accreditation standards by Sept 30, 2009
    • Shuts out small and hospital-based providers
    • CMS: Opportunity to create savings and reduce Medicare fraud
  • Congress: 18-month postponement on DME competitive bidding
  • Following 18-month moratorium, Hospital DMEPOS suppliers would be able to provide basic DME
    • Provide canes, crutches, glucose monitors, walkers at admission and discharge
  • Hospital coalition (60 hospital companies in 23 states) working with AHA’s support to expand eligible DMEPOS
Rochelle Archuleta

American Hospital Association


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