MedPAC Highlights Need for Post-Acute Care Reform and Payment Alignment

The Medicare Payment Advisory Commission (MedPAC) recently discussed ongoing challenges and opportunities in post-acute care regulation and payment alignment during their December public meeting. A key area of focus was the introduction of the TEAMS alternative payment model, launching in January, which aims to impact care delivery for five high-cost procedures across 188 markets, potentially reshaping how hospitals coordinate with skilled nursing facilities (SNFs), inpatient rehabilitation facilities (IRFs), and home health agencies (HHAs). Commissioners expressed concern regarding the governance of Medicare Advantage (MA) plans, particularly their prior authorization practices, highlighting the need for increased oversight to ensure beneficiary access and equitable provider relationships. There is substantial interest in reforming the three-night hospital stay requirement that currently conditions Medicare coverage for nursing home care, as well as in developing a unified, site-neutral payment system for post-acute services, though the latter is still in early conceptual stages. MedPAC members emphasized the importance of advancing value-based payment programs to incentivize quality and efficiency improvements. Commissioners noted that current Medicare fee-for-service payments maintain margins above 10% for SNFs, IRFs, and HHAs, which underlines ongoing federal efforts to transition to alternative payment methodologies that reduce unnecessary use of post-acute settings without compromising care quality. The TEAMS model received recognition as an initial step toward episode-based payments that could enhance accountability and care coordination, though it currently lacks full alignment between hospital and post-acute care providers. Additionally, commissioners pointed to the variable influence of MA plan market power on post-acute care providers, often disadvantaging smaller entities such as nursing homes in authorization and care placement decisions. Research priorities identified include assessing the geographical impact of care networks on beneficiary use of distant SNFs or IRFs and monitoring significant growth in IRF spending, which has surged by 56% over the past decade, raising questions about cost drivers and care appropriateness. Several commissioners underscored the need for stronger patient-centered measures within value-based programs, with better integration of patient and family feedback to improve safety and care experience in nursing homes. Concerns were also raised about the balance between regulatory compliance and fostering a culture focused on service quality, highlighting that rigorous regulatory requirements may inadvertently contribute to high costs without enhancing patient satisfaction. Overall, the MedPAC session illuminated critical gaps in the current post-acute care system, underscoring the necessity for regulatory, payment, and care delivery reforms. The commission commits to closely evaluating outcomes of payment models like TEAMS and the evolving interplay between Medicare Advantage and traditional Medicare in the post-acute sector to guide future policy recommendations to Congress.