MEDPAC: Hospitals Should Get 1% Payment Update in 2013

Skilled nursing facility services
Congress should eliminate the market basket update and direct the HHS secretary to revise payment system for SNFs for 2013, and a 4% reduction in 2014 and subsequent reductions "until Medicare's payments are better aligned with providers' costs."

Also, payments to SNFs with "relatively high risk adjusted rates of rehospitalization during Medicare-covered stays, and expand the policy to "include a time period after discharge from the facility," such as 30 days.

The commission reasoned that increases in payments between 2009 and 2010 "outpaced increases in providers' costs, reflecting the continued concentration of days in the highest payment case-mix groups." The commission said that in 2010, the aggregate Medicare margin for freestanding SNFs was 18.5%.

Also, the commission said that avoidable rehospitalizations of SNF patients "increase Medicare's spending, expose beneficiaries to additional disruptive care transitions, and can result in hospital-acquired infections or other adverse health consequences."  Therefore, it recommends that payments should be reduced for those SNFs with relatively high rates of rehospitalization.

"Our recommendation would help counter the financial incentive SNFs have to rehospitalize beneficiaries. Because a readmission policy will penalize hospitals with high readmission rates beginning in October, 2012, a SNF rehospitalization policy would better align hospitals' and SNFs' incentives."