ProPAC offers controversial recommendations
ProPAC offers controversial recommendations
Freeze Medicare payments to hospitals, reduce graduate medical education (GME) payments, and open up for bid extended "episodes of care" among hospitals, physician groups, insurers, and/or provider networks.
These are three of the unexpected messages from the Prospective Payment Assessment Commission (ProPAC), the Washington, DC-based advisory panel to Congress, in its recently released 1997 annual report to Congress.
This was ProPAC’s most controversial analysis in its 12-year history. The commission has never recommended a zero Medicare update. In this year’s report, however, ProPAC officials say they can’t ignore statistics like this:
• Hospital PPS margins increased to 10.3% in 1996, up from 5.6% in 1995, while cost increases remained low.
• Hospital profits in 1997 will be about 12%, while inflation hovers around 2%.
And ProPAC does not limit zeal for greater efficiency to Part A of Medicare, notes ProPAC executive director Donald Young. The Commis sion expands its usual reach into Part B in one portion of the 145-page report when it urges Congress go further into "bundling payments" toward the ultimate "episode of care" payment model. In bundled projects, Part A (hospital) and Part B (physician) services are combined into one contract and negotiated as a single service.
ProPAC takes the bundled notion further, however, by recommending a bundling of all acute care services, as well as physician services, nursing home care, rehabilitation, skilled-nursing facilities, or any other supportive care following an inpatient stay. The entire spectrum of care, ProPAC says, would be termed an "episode of care."
"Many beneficiaries use multiple providers during an episode of care," the report points out. "Under fee for service, providers have no incentive to minimize total episode costs by directing patients to the least intensive, most appropriate site of care or to coordinate services across settings.
"Linking the payments for the bundle of services furnished during an episode could address these issues. As a result Medicare beneficiaries would benefit from better coordinated services, and the [Medicare] program could curb its spending."
To accomplish this, ProPAC recommends a demonstration project. In such a pilot, these issues would have to be addressed, the report says:
• providers, services, and time period covered;
• providers and services that are mostly likely to be used after a hospital stay for a particular condition;
• definition of the acute/post-acute episode of care so payment level could be established;
• which type of entity would receive the payment.
This prospect, by ProPAC’s own admission, could open up a flood gate of political and market competition, pitting all the players against each other acute care hospitals, post-acute care provider, provider service networks, and preferred provider organizations.
"One of the most important design and political issues in a linked payment approach is deciding which type of entity would receive the payment," the report points out. "Since this entity would organize and oversee the continuum of services for beneficiaries, it would bear the risk that payments would not cover costs."
Given the assumption of risk, "this entity would have a strong incentive to develop the most efficient patterns of care."
In the area of GME, ProPAC makes these two recommendations:
• Cut funding for medical education by 9%.
• Give teaching hospitals a "flat amount" for training physicians, regardless of how many physicians they train, rather than the approximately $70,000 per physician they now receive.
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