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Episode-Based Payments And Outcome Measures Under A Unified Payment System For Post-Acute Care: Refinement on the Way

By: Lisa Remington, President Remington Health Strategy Group and President The Remington Report

MedPAC, the Commission that reports to Congress on Medicare, is researching a different payment approach for episode-based PAC PPS.  This changes the prior development of a common prospective payment system for home health agencies, skilled nursing facilities, inpatient rehabilitation facilities and long-term care hospitals mandated by Congress.

KEY POINTS: The MedPAC Commission will continue to refine two aspects of the stay-based unified prospective payment system (PPS) for PAC including an episode-based payment design and developing two uniformly defined outcomes-based measures—discharge to community and a measure of potentially avoidable admissions and readmissions in acute care hospitals.

The analysis will initially focus on payment for episodes with up to two PAC services within seven days of each other and exclude hospital and physician services. MedPAC will develop two measures for comparing outcomes across the four PAC settings: a composite measure of general acute-care hospital admissions and readmissions; and a discharge to community measure that includes mortality and readmission rates within 31 days.

Why an Episode-Based PAC PPS Design?

The planned work on an episode-based PAC PPS is to:

1) to encourage an efficient mix of post-acute care providers

2) institutional PAC providers can offer a continuum of care

3) to reduce the number of transitions between providers for beneficiaries

4) it could lower program spending and beneficiary cost-sharing

Defining the Planned Work

Planned work is taking place to update the model using 2017 stays. The model will look at creating episodes from individual PAC stays that are within 7 days of each other, evaluate overall accuracy and accuracy by type of episode, and compare episode and stay-based payments. The initial analysis will focus on solo and pair of PAC stays (85% of sequences).

The considerations for developing uniform value-based PAC measures would be based on:

• Readmissions*

Medicare spending per beneficiary**

• Combined admissions and readmissions**

• Discharge to community**

• Patient experience and infections rates which are existing measures only in some settings)

* developed last analytic cycle.

**Plan to develop this analytic cycle

Work in Progress

The work in progress for development of episode-based PAC PPS model combines admissions and readmission rates.

Readmissions and Admissions

Measure of admissions and readmissions, which include community-admitted beneficiaries:

* Include LTCHs but during-stay rate will be understated

* Include observation stays in the definition of hospitalizations

Measure Development Plan

* Define planned and potentially preventable hospitalizations, then develop uniform, risk-adjustment model

* Calculate provider-level all-cause and potentially preventable rates both within-stay and 30-days post-discharge

Discharge to Community

The primary goal for the majority of PAC patients is to return home and stay at home. Measures include:

* Measure to gauge how successfully providers discharge beneficiaries home with no planned readmissions or death within 31 days following discharge

* Measure development plan:

            - building on CMS’s measure, develop uniform measure definition and risk-adjustment model

            - calculate provider-specific rates

Next spring, the MedPAC staff plans to report results of the episode-based PAC PPS design and development of two uniform outcomes measures. In future analytic cycles, MedPAC could use uniform measures to model a potential PAC value-based program.

 Remington’s Analysis


Fee-for-service payments for PAC are high relative to cost of care, which distorts Medicare Advantage and ACO benchmarks. The episode-based design is important because ACOs are moving into higher risk.

CMS is proposing to overhaul the Medicare Shared Savings Program (MSSP). Currently, 82% of ACOs in the program aren't taking on any risk. They share in savings but do not share in losses.  Currently, ACOs are allowed to remain in the one-sided track for up to six years. 

The redesigned program — which CMS has named "Pathways to Success" — would expand ACO participation agreements from three years to five years and offer eligible ACOs two participation options: "basic" and "enhanced."

  • Basic track: The agency would combine Tracks 1 and 2 of today’s MSSP into a Basic track. Organizations would sign five-year agreements. During the first two years, they would share in savings only (also known as an upside-only arrangement), and downside risk would phase in over the last three years of the agreement. Basic track organizations would qualify as Advanced Alternative Payment Models (APMs) under the Medicare Access and CHIP Reauthorization Act (MACRA) during the fifth year of the agreement. This would let participating physicians earn higher payments from Medicare.
  • Enhanced track: Organizations would enter a five-year agreement, and the upside- and downside-risk levels would remain the same throughout that period. Organizations that selected this track would automatically qualify as Advanced APMs. The Enhanced track is modeled after today’s MSSP Track 3.

Value-Based Purchasing

Uniform outcome measures can be used in future PAC value-based purchasing program. The proposed outcome measures are common denominators among all providers.


Development of uniform measures allow for a direct comparison of rates across providers.

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