MedPac’s 2015 Report to Congress

Our friends at MedPac are at it again.  The group is responsible for reviewing Medicare policy and making recommendations to Congress on payments to providers.


2015’s report doesn’t make any major new recommendations that haven’t been made before.  But the reiteration of such recommendations should be noted.


The most important, and newest recommendation by MedPac is to allow CMS discretion in reducing payments to agencies based on hospitalizations.  Agencies with a higher than normal, risk-adjusted rates of hospital readmissions would receive a lower reimbursement rate than those of its peers.  How this rate would be calculated is up for speculation at this point but will likely come down hardest on the agencies that accept intensive care patients.


For 2016, MedPac recommends that CMS eliminates the market basket update. MedPac goes on to further recommend additional rebasing.  As we all know, rebasing is a nice way of saying agencies are still making too much money due to the outdated and archaic cost reporting methods you must use to report costs which inflate profit margins.  The net result of using rebasing is reducing reimbursement.


Additional changes to the case-mix system is also recommended.  The change recommend is to remove the amount of therapy visits as a payment factor.  Instead, patient characteristics should be used as the factor in determining therapy and non-therapy services reimbursement.


Areas that have historically shown a strong history of fraudulent activities should also be monitored and targeted.  MedPac is continuing to recommend strong actions against any agency suspected of fraudulent activity and billing.  Additionally, MedPac continues to recommend the suspension of new providers in areas where fraudulent activity is deemed to be rampant.


Hospice providers didn’t escape the wrath of MedPac.  The advisory group recommends the elimination of 2016’s payment rate update.  So in other words, MedPac is recommending the hospice providers reimbursement rates do not change from the current year.


An interesting comment which shows that MedPac is in-tune with industry news was the mention of two large home health transactions.  Specifically, MedPac doesn’t mention by name, but includes Encompass Home Health’s purchase by national rehab hospital operator, HealthSouth and the merger of Gentiva and Kindred, a national nursing home operator.  The comment points to the fact that home health margins are still strong enough to attract investors and therefore in MedPac’s way of thinking, too high.


The average profit margin for free standing agencies like yours in 2013 averaged 12.7%.  Again as previously noted, this profit margin is based on cost report data – not real world financial profit or tax return profits. Likely if MedPac was to use data from tax returns, the profit margins would be drastically different – if there was a profit margin at all and didn’t represent a year end loss.  But, you will also be happy to know that MedPac expects your profit margin to be 10.3% this year – so let’s make sure you don’t disappoint the bureaucrats.


As the drafted final rule for 2016 becoming available over the summer, we will keep you posted. Likely, some of these recommendations will be rolled forward into the 2016 rule but the drafted rule usually presents a good idea of the effects a new year will bring to providers.