The idea of Medicare bundled payments for post-acute care has a ways to go before it could be used widely, according to a study in CMS' Medicare and Medicaid Research Review.
After reviewing Medicare Severity-Diagnosis Related Groups, or MS-DRG, data from several states, researchers led by 3M Information System's James C. Vertrees came to the conclusion that MS-DRGs "by themselves are an inadequate unit of payment for post-acute care payment bundles," but that it would still be feasible to incorporate post-acute services like skilled nursing or rehabilitation into a MS-DRG inpatient payment bundle.
The "expansion of the basic DRG payment approach can provide a strong financial incentive for providers to better coordinate care, potentially leading to improved efficiency and outcome quality," wrote Vertrees, a senior economist at 3M, and colleagues.
The research team studied hospitalizations for Medicare fee-for-service beneficiaries between 2006 and 2009 related to 167 MS-DRGs in California, Florida, Virginia, New Jersey, Washington, Minnesota, Kansas, Louisiana and Colorado.
Following the diagnosis and payments through the MS-DRGs, the researchers wanted to try to answer several questions related to the payment method's accuracy. For instance, can MS-DRGs be used as the unit of payment for hospital-bundled payments, or do other patient attributes need to be taken into account in order to provide accurate payment? And how does the inclusion of specific services, like physician office visits or readmissions, impact the accuracy of the bundled payment?
They found that measures of a patient's chronic illness burden need to be added to the MS-DRGs "in order to create accurate bundled payments," because "during the post-acute care period, the patient's chronic illness burden is likely to be one of the primary determinants of resource use rather than the acute illnesses that precipitated the hospitalization."
They hypothesized that as the post-acute care period is lengthened, the impact of a patient's chronic illness burden will increase and the impact of MS-DRG severity will decrease, and that
They also found cost variance for post-acute services decreasing as the length of the post-acute care window extended, while cost variance increased somewhat as services in the bundle expanded -- modestly for most services, but significantly for readmissions.
"Thus, longer post-acute windows are a feasible option," they wrote.
At the same time, Vertrees and colleagues cautioned, post-acute bundling raises a number of beneficiary access and financial risks. "The greater variation could create an opportunity to avoid identifiably higher cost patients," they wrote. "Patients with a high chronic illness burden are readily identifiable and, therefore, are at risk for being selectively avoided. The incentive to avoid high cost patients is especially high if readmissions are included in the payment bundle."
In 2008, the Medicare Payment Advisory Commission recommended bundled payments as a way to reduce variance in Medicare rates for four of the main post-acute settings, skilled nursing facilities, home health care, inpatient rehabilitation hospitals, and long-term care hospitals.
CMS has overseen a few post-acute care retrospective payment demonstrations in the past, and under the Affordable Care Act, the agency has funded a number of Medicare post-acute care bundling pilots that are currently ongoing.