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95–993 2015

MEDICARE POST-ACUTE CARE DELIVERY AND 

OPTIONS TO IMPROVE IT 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

APRIL 16, 2015 

Serial No. 114–31 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

(II) 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

LARRY BUCSHON, Indiana 

BILL FLORES, Texas 

SUSAN W. BROOKS, Indiana 

MARKWAYNE MULLIN, Oklahoma 

RICHARD HUDSON, North Carolina 

CHRIS COLLINS, New York 

KEVIN CRAMER, North Dakota 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

DORIS O. MATSUI, California 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

PETER WELCH, Vermont 

BEN RAY LUJA ́ N, New Mexico 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky 

YVETTE D. CLARKE, New York 

DAVID LOEBSACK, Iowa 

KURT SCHRADER, Oregon 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, California 

(III) 

SUBCOMMITTEE ON HEALTH

JOSEPH R. PITTS, Pennsylvania 

Chairman 

BRETT GUTHRIE, Kentucky 

Vice Chairman 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

CATHY MCMORRIS RODGERS, Washington 

LEONARD LANCE, New Jersey 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

LARRY BUCSHON, Indiana 

SUSAN W. BROOKS, Indiana 

CHRIS COLLINS, New York 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

GENE GREEN, Texas 

Ranking Member 

ELIOT L. ENGEL, New York 

LOIS CAPPS, California 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

DORIS O. MATSUI, California 

BEN RAY LUJA ́ N, New Mexico 

KURT SCHRADER, Oregon 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, California 

FRANK PALLONE, JR., New Jersey (ex 

officio) 

(V) 

C O N T E N T S 

Page 

Hon. Joseph R. Pitts, a Representative in Congress from the Commonwealth 

of Pennsylvania, opening statement ................................................................... 1 

Prepared statement .......................................................................................... 2 

Hon. Gene Green, a Representative in Congress from the State of Texas, 

opening statement ................................................................................................ 3 

Hon. Frank Pallone, Jr., a Representative in Congress from the State of 

New Jersey, opening statement .......................................................................... 6 

Prepared statement ..........................................................................................

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

prepared statement .............................................................................................. 97 

WITNESSES

Mark E. Miller, Executive Director, Medicare Payment Advisory Commission . 7 

Prepared statement .......................................................................................... 9 

Steven Landers, MPH, President and CEO, Visiting Nurse Association Health 

Group .................................................................................................................... 44 

Prepared statement .......................................................................................... 46 

Dr. Samuel Hammerman, Chief Medical Officer, LTACH Hospital Division, 

Select Medical Corporation ................................................................................. 57 

Prepared statement .......................................................................................... 59 

Melissa Morley, Ph.D., Program Manager, Health Care Financing and Payment, RTI International ...................................................................................... 63 

Prepared statement .......................................................................................... 65 

Mr. Leonard Russ, Principle Partner, Bayberry Health Care, Chairman of 

American Health Care Association ..................................................................... 73 

Prepared statement .......................................................................................... 75 

SUBMITTED MATERIAL

Pitts documents 

Statement of the Coalition to Preserve Rehabilitation ................................. 99 

Statement of the Orthotic and Prosthetic Alliance ........................................ 108 

Statement of the National Association for Home Care and Hospice ............ 119 

Statement of the Premiere Healthcare Alliance ............................................ 124 

Statement of the American Hospital Association .......................................... 129 

Statement of the American Medical Rehabilitation Providers Association . 134 

Statement of National Long-Term Hospitals ................................................. 144 

Statement of National Association of Chain Drugstores ............................... 149 

(1) 

MEDICARE POST-ACUTE CARE DELIVERY AND 

OPTIONS TO IMPROVE IT 

THURSDAY, APRIL 16, 2015 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON HEALTH, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC. 

The subcommittee met, pursuant to call, at 10:15 a.m., in room 

2322, Rayburn House Office Building, Hon. Joseph R. Pitts (chairman of the subcommittee) presiding. 

Present: Representatives Pitts, Guthrie, Shimkus, Murphy, Burgess, Lance, Griffith, Bilirakis, Long, Ellmers, Bucshon, Brooks, 

Collins, Upton (ex officio), Green, Engel, Capps, Butterfield, Castor, 

Sarbanes, Matsui, Schrader, Kennedy, Cardenas, and Pallone (ex 

officio). 

Also Present: Representative McKinley 

Staff Present: Leighton Brown, Press Assistant; Noelle Clemente, 

Press Secretary; Robert Horne, Professional Staff Member, Health; 

Michelle Rosenberg, GAO Detailee, Health; Chris Sarley, Policy Coordinator, Environment & Economy; Adrianna Simonelli, Legislative Clerk; Heidi Stirrup, Health Policy Coordinator; John Stone, 

Counsel, Health; Josh Trent, Professional Staff Member, Health; 

Traci Vitek, HHS Detailee, Health; Ziky Ababiya, Minority Policy 

Analyst; Jen Berenholz, Minority Chief Clerk; Christine Brennan, 

Minority Press Secretary; Jeff Carroll, Minority Staff Director; Tiffany Guarascio, Minority Deputy Staff Director and Chief Health 

Advisor; and Arielle Woronoff, Minority Health Counsel. 

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH 

OF PENNSYLVANIA 

Mr. PITTS. The subcommittee will come to order. The chair will 

recognize himself for an opening statement. 

Over the past several years, this committee has focused on understanding and responding to the need to modernize Medicare’s financing and payment structures. Today’s hearing will give members and stakeholders an opportunity to examine the current state 

of post-acute care, PAC, for Medicare beneficiaries and discuss 

ways it can be improved. 

Post-acute care is care that is provided to individuals who need 

additional help recuperating from an acute illness or serious medical procedure usually after discharge from hospital care. Postacute care providers such as skilled nursing facilities, SNFs, inpatient rehabilitation facilities, IRFs, long-term care hospitals, home 

2 

health agencies, and hospices are reimbursed by Medicare with different payment systems, which were originally designed to focus on 

a phase of a patient’s illness in a specific site of service. As a result, payments across post-acute care settings may differ considerably even though the clinical characteristics of the patient and the 

services delivered may be very similar. 

According to the Medicare Payment Advisory Commission, MedPAC, Medicare’s payments to PAC providers totaled $59 billion 

in the year 2013. For patients who are hospitalized for exacerbations of chronic conditions, such as congestive heart failure, 

Medicare spends nearly as much on post-acute care and readmissions in the first 30 days after a patient is discharged as it does 

for the initial hospital admission. Medicare payments for post-acute 

care have grown faster than most other categories of spending. For 

example, total Medicare spending for patients hospitalized with 

myocardial infarction, congestive heart failure, or hip fracture grew 

by 1.5 to 2 percent each year between 1994 and 2009, while spending on post-acute care for those patients grew by 4 1⁄2 to 8 1⁄2 percent per year. 

There are many opportunities for the Medicare program to save 

taxpayer dollars and improve seniors’ quality of care through better 

management of post-acute care. One way is to make sure patients 

are treated in the most cost effective clinically appropriate setting. 

The current model has significant reimbursement disparities for 

treating the same condition. For example, for patients hospitalized 

with congestive heart failure in 2008, Medicare paid about $2,500 

in the 30 days after discharge for each patient who received home 

health care as compared with $10,700 for those admitted to a SNF 

and $15,000 for those cared for in a rehabilitation hospital. 

Our colleague, Representative Dave McKinley, has had a long interest in this subject and has sponsored legislation, along with Representatives Tom Price, John McNerney and Anna Eshoo to provide 

bundled payments for post-acute care services under Medicare. His 

bill is H.R. 1458, the quote, ‘‘Bundling and Coordinating Post-Acute 

Care Act of 2015’’ and is also known as BACPAC Act of 2015. This 

bill is designed to foster the delivery of high-quality, post-acute 

care services in the most cost effective manner while preserving the 

ability of patients, with guidance from their physician, to select 

their preferred provider of post-acute care services. This is the type 

of legislation that has the potential to promote healthy competition 

among PAC providers on the basis of quality, cost, accountability, 

and customer service while advancing innovation in care coordination, medication management, and hospitalization avoidance. 

I am pleased the committee is examining post-acute care issues. 

Proposals such as BACPAC have potential to reward quality, 

achieve savings, and strengthen the sustainability of the Medicare 

program. 

I look forward to hearing from our witnesses today, and I yield 

back. 

[The prepared statement of Mr. Pitts follows:] 

PREPARED STATEMENT OF HON. JOSEPH R. PITTS

The Subcommittee will come to order. 

The Chairman will recognize himself for an opening statement. 

3 

Over the past several years this committee has focused on understanding and responding to the need to modernize Medicare’s financing and payment structures. Today’s hearing will give Members and stakeholders an opportunity to examine the 

current state of post-acute care (PAC) for Medicare beneficiaries and discuss ways 

it can be improved. 

Post-acute care is care that is provided to individuals who need additional help 

recuperating from an acute illness or serious medical procedure, usually after discharge from hospital care. 

Post-acute care providers—such as skilled nursing facilities (SNFs), inpatient rehabilitation facilities (IRFs), long-term care hospitals (LTCHs), home health agencies (HHAs), and hospices—are reimbursed by Medicare with different payment systems which were originally designed to focus on a phase of a patient’s illness in a 

specific site of service. As a result, payments across post-acute care settings may 

differ considerably even though the clinical characteristics of the patient and the 

services delivered may be very similar. 

According to the Medicare Payment Advisory Commission (MedPAC), Medicare’s 

payments to PAC providers totaled $59 billion in 2013 1A1. For patients who are 

hospitalized for exacerbations of chronic conditions, such as congestive heart failure, 

Medicare spends nearly as much on post-acute care and readmissions in the first 

30 days after a patient is discharged, as it does for the initial hospital admission. 

Medicare payments for post-acute care have grown faster than most other categories 

of spending. 

For example, total Medicare spending for patients hospitalized with myocardial 

infarction, congestive heart failure, or hip fracture grew by 1.5 to 2.0% each year 

between 1994 and 2009, while spending on post-acute care for those patients grew 

by 4.5 to 8.5% per year 1A2. 

There are many opportunities for the Medicare program to save taxpayers’ dollars 

and improve seniors’ quality of care through better management of post-acute care. 

One way is to make sure patients are treated in the most cost-effective, clinically 

appropriate setting. 

The current model has significant reimbursement disparities for treating the 

same condition. For example, for patients hospitalized with congestive heart failure 

in 2008, Medicare paid about $2,500 in the 30 days after discharge for each patient 

who received home health care, as compared with $10,700 for those admitted to a 

SNF, and $15,000 for those cared for in a rehabilitation hospital. 

Our colleague, Rep. Dave McKinley, has had a long interest in this subject and 

has sponsored legislation along with Reps. Tom Price and John McNerney to provide 

bundled payments for post-acute care services under Medicare. His bill is H.R. 1458, 

the ‘‘Bundling and Coordinating Post-Acute Care Act of 2015,’’ and is also known 

as ‘‘BACPAC’’ Act of 2015. 

This bill is designed to foster the delivery of high-quality post-acute care services 

in the most cost-effective manner, while preserving the ability of patients, with 

guidance from their physician, to select their preferred provider of post-acute care 

services. This is the type of legislation that has the potential to promote healthy 

competition among PAC providers on the basis of quality, cost, accountability and 

customer service while advancing innovation in care coordination, medication management, and hospitalization avoidance. 

I am glad the committee is examining post-acute care issues. Proposals such as 

BACPAC have potential to reward quality, achieve savings, and strengthen the sustainability of the Medicare program. 

I look forward to hearing from our witnesses today and yield the balance of my 

time to ———————————————— (or to any Republican Member seeking 

time). 

Thank you. 

Mr. PITTS. And at this time, I recognize the ranking member of 

the subcommittee, Mr. Green, 5 minutes for opening statement. 

OPENING STATEMENT OF HON. GENE GREEN, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. GREEN. Thank you, Mr. Chairman. 

Millions of Medicare beneficiaries require continued care in postacute settings after hospitalization. In 2013, 42 percent of Medicare 

beneficiaries discharged from the hospital went to post-acute care 

settings. Medicare spent $59 billion on these services that year. 

4 

Medicare pays each type of PAC facility at a different rate. These 

different rates are created under the notion that sicker patients 

will require more costly care in specialized facilities, which seems 

normal. 

However, advancements in the practice of medicine as well and 

thoughtful analysis by MedPAC and other independent researchers 

call into question the wisdom of such differentiated payment rates. 

MedPAC has long noted that shortcomings in Medicare’s fee-forservice payments for post-acute care. Just last month, MedPAC reiterated that payments for post-acute care are too generous and 

significant shortcomings in the current structure exists. There is 

broad consensus on the need for improved quality measures across 

the post-acute care setting and a need for a more coordinated approach to care. 

Unfortunately, our current system is characterized by silos. Patient-centered coordinated care is not encouraged by the incentive 

structure. Yet, while there is agreement on the need to improve the 

way post-acute care is delivered and reimbursed, significant challenges have hindered meaningful reform. This includes a lack of 

uniform definitions, standardized assessment information across 

care settings, and substantial geographic variation. Progress has 

been made to address these challenges, including changes passed 

in the law as part of the Affordable Care Act, the IMPACT Act, and 

most recently H.R. 2, the Medicare Access and CHIP Reauthorization Act. The Affordable Care Act included improvements in the 

post-care system, acute care system. As a result, Medicare is currently piloting delivery reforms. 

The Centers on Medicare and Medicaid Services is in the process 

of testing the concept of bundled payments for post-acute care. 

Bundled payments encourage accountability for cost and quality by 

incentivizing only clinically necessary care and enhanced coordination. This has the potential to encourage more efficient delivery, 

break down those silos, and facilitate care coordination. 

The ACA also required home health prospective payment system 

to be rebased to reflect more accurate factors, such as the average 

cost of providing care and the mix of intensity of services. Rebasing 

is currently being phased in and scheduled to be fully implemented 

by 2017. These important steps will help move us to an improved 

post-acute care system for beneficiaries and taxpayers. 

Last Congress, the Improved Medicare Post-Acute Care Transformation or IMPACT Act was signed into law. This legislation reflected bipartisan, bicameral, stakeholder agreement that meaningful reform must be based on standardized post-acute assessment 

data, also provider settings. 

The collection of common post-acute patient assessment data is 

to determine the right setting for patients who will facilitate discussions on how to reform and improve care for beneficiaries and 

the Medicare system as large. Without standardized patient assessment data, reforms to base post-acute care reimbursements on patient characteristics rather than on service in setting specific payment rates will be obstructed. There is a widespread agreement 

that new payment and delivery sent models are necessary to improve our healthcare system and achieve better patient outcomes, 

population health, and lower per capita cost. 

5 

As providers and CMS are in the process of testing new models, 

there is still much work to do. This work is ongoing and now is the 

time to dedicate resources toward building the knowledge base to 

help our understanding and inform decisionmaking. There are 

many potential policies available to pursue and using the lessons 

learned from recent efforts is an important step. This must be done 

before considering large-scale adoption of reform. Simply bundling 

payments in advance of this work would be premature. 

The Bundling and Coordination Post-Acute Act, BACPAC, takes 

a different approach from what MedPAC has considered. Commenting on any specific approach would preempt the results of pilots and preclude CMS from utilizing the lessons learned from IMPACT Act and pilot programs to create more effective bundle models. 

I look forward to hearing our witnesses today and further debate 

on our post-acute care reform. And I yield back my time. 

Mr. PITTS. The chair thanks the gentleman. 

Now recognize the vice chairman of the subcommittee, the gentleman from Kentucky, Mr. Guthrie for 5 minutes for an opening 

statement. 

Mr. GUTHRIE. Thank you, Mr. Chairman. I would like to yield my 

time to our colleague on the full committee, Mr. McKinley from 

West Virginia. 

Mr. PITTS. The gentleman is recognized. 

Ms. MCKINLEY. Well, thank you. Thank you, Congressman. And 

thank you, Chairman, for the opportunity to address the group 

today. 

This legislative hearing on post-acute care and especially on H.R. 

1458, this Bundling and Post-Acute Care Act. As many of you may 

be aware, the President has already put post-acute care bundling 

in his budget, and we passed it, and the House has already included in our House version of what is in the conference right now 

is a concept of this. So it is very important that we—it is not a new 

concept. It is one that we have been working together on this 

framework for now 3 years, both with all the stakeholders. We 

have been working with the committee staff and they have been incredibly supportive in trying to put together something that answers this need. But for 3 years been trying to put this—because 

this is going to improve care for seniors and is going to help Medicare in the long run with it. 

It develops a model for post-acute care services which will increase efficiency, encourage more choice and personalized care for 

patients, and offer some significant savings to the program in the 

process. There have been some people have argued that it might 

cost money. To the contrary. The CBO has already issued a finding 

that it could save between $20 and $25 billion, with a B, for Medicare if this program were put through. Not through cuts, but 

through creating efficiency in the post-acute care system. A bill 

that innovates, improves efficiency, protects Medicare and has a 

pay for of $20 to $25 billion, I think it deserves meaningful consideration. 

And I really applaud the committee and the chairman all for giving it consideration here today. And I yield back the balance of my 

time. 

6 

Mr. PITTS. Thank you. 

Mr. GUTHRIE. Thank you, Mr. Chairman. I yield back. 

Mr. PITTS. The chair thanks the gentleman. 

Now recognize the ranking member of the full committee, Mr. 

Pallone, 5 minutes for opening statement. 

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY 

Mr. PALLONE. Thank you, Mr. Chairman, for calling today’s hearing on post-acute care delivery, and I want to thank all of our witnesses for coming to testify, but especially welcome Dr. Steven 

Landers from New Jersey who is the president and CEO of the Visiting Nurse Association Health Group. 

The Affordable Care Act has put Medicare on a path towards 

post-acute reform. However, there is still much more that needs to 

be done. Our committee clearly has a role to play in advancing 

positive beneficiary-focused reforms related to post-acute care for 

Medicare beneficiaries. We have a Medicare system right now with 

misaligned incentives, inaccurately priced payments, and little information on the quality or outcomes of beneficiaries served by 

post-acute providers like skilled nursing facilities, home health 

agencies, long-term care hospitals, or inpatient rehab facilities. In 2013, Medicare spent about $59 billion on post-acute care providers, and I believe that there are viable payment solutions in this 

sector that are more sensible than increasing costs for beneficiaries 

of average incomes of only $22,500. What we know is that the quality outcomes and costs of post-acute care has a lot of variation 

around the country. And as a result of the ACA, Medicare is currently testing a number of payment system reforms that help improve care and outcomes in this area. Meanwhile, the need for 

post-acute care is not well-defined. Research has shown the similarity of patients treated in different post-acute care settings. A patient being rehabilitated from a stroke or hip replacement can be 

treated in a skilled nursing facility or an inpatient rehab facility, 

but in the latter Medicare pays 40 to 50 percent higher than it 

pays the skilled nursing facility for the same services. 

And we do not have any common and comparable data across 

PAC providers to determine which patients fare best in which settings or even what appropriate levels of care are for patients of 

various acuity. That is why last year Congress passed the bipartisan IMPACT Act which, for the first time, requires providers to 

report standardized assessment data across the various post-acute 

care settings. While there are many interesting policy ideas in this 

arena, we need to learn from the ACA efforts underway and the 

data being collected as a result of the IMPACT Act and provide 

enough time to ensure the models work in a way that doesn’t compromise access to high-quality services for our beneficiaries. 

Data collected by the IMPACT Act, coupled with MedPAC’s recommendations that Congress could do better or could better align 

post-acute care incentives to better utilize Medicare dollars, should 

be a useful guide for our efforts. And once we have improved information on post-acute care, I look forward to working with my colleagues on the committee to find policy solutions to ensure that 

7 

Medicare continues to provide quality and effective health care to 

our seniors. 

I yield back, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman as always. 

Any written statements of the members’ opening statements will 

be made part of the record. That concludes our opening statements. 

I have a UC request. I would like to submit the following documents for the record. First, testimony from the Coalition to Preserve Rehabilitation and Orthotic and Prosthetic Alliance, and 

statements from the National Association For Home Care and Hospice, the Premiere Healthcare Alliance, the American Hospital Association, the American Medical Rehabilitation Providers Association, National Long-Term Hospitals, and the National Association 

of Chain Drugstores. 

Mr. GREEN. No objection. 

Mr. PITTS. Without objection, so ordered. 

[The information appears at the conclusion of the hearing.] 

Mr. PITTS. We have two panels today before us. On our first 

panel we have Dr. Mark Miller, executive director of the Medicare 

Payment Advisory Commission. Thank you very much, Dr. Miller, 

for coming today. Your written testimony will be made part of the 

record. You will have 5 minutes to summarize. And, at this time, 

you are recognized for 5 minutes for your opening statement. 

STATEMENT OF DR. MARK E. MILLER, EXECUTIVE DIRECTOR, 

MEDICARE PAYMENT ADVISORY COMMISSION 

Mr. MILLER. Chairman Pitts—— 

Mr. PITTS. Microphone. Yes. OK. 

Mr. MILLER. Sorry about that. 

Chairman Pitts, Ranking Member Green, distinguished committee members, thank you for asking the Medicare Payment Advisory Commission to testify today. As you know, MedPAC was created by the Congress to advise it on Medicare, and today we were 

asked here to talk about our work on post-acute care. 

The commission’s work in all instances is guided by three principles: How you assure that the beneficiary gets the access to high 

quality coordinated care, to protect the taxpayer dollar, and to pay 

plans and providers in a way to achieve those two goals. Post-acute 

care services are a vital part of the Medicare benefit. They provide 

rehabilitation and nursing services at critical points in a beneficiary’s care. But I think we are all aware that there are problems, 

particularly in fee-for-service, that face the post-acute care. 

Our siloed payment systems encourage fragmented care by paying based on setting rather than based on the needs of the beneficiary. The nature of fee-for-service reimbursement itself, encourages service following in which, in some cases, may be unnecessary. 

We know that if Medicare payment rates are set too high or constructed inconsistently across setting, they can result in patient selection and patterns of care that focus on revenue rather than on 

patient need. And for post-acute care, the clinical guidelines themselves regarding when services are needed are poorly defined. And 

this isn’t an accusation. This is what you get when you talk to clinicians and it makes it hard for both clinicians and policymakers 

in this area to make policy. 

8 

So what is the commission’s guidance? In the short run, the commission would set fee-for-service payment rates to reflect the efficient provider. For example, the commission’s annual payment 

analysis has determined that payment rates for home health and 

skilled nursing facilities have been set too high for over a decade, 

and we have repeatedly recommended rebasing those rates downward to be more consistent with the cost of an efficient provider. 

A commission goal is to pay the same for similar patients regardless of setting of care. For example, the commission recommended 

that the secretary examine paying the same base rates in inpatient 

rehab facilities and skilled nursing facilities for a selected set of 

conditions where patients appear to be similar, in other words, to 

have a site neutral payment. 

The commission would reform payments to avoid patient selection strategies. We have recommended that CMS revise its home 

health and its skilled nursing facility payment systems to remove 

the strong incentive to take physical rehab patients and to avoid 

complex medical patients. 

The commission has recommended policies to moderate excessive 

services. For example, the most rapid growth in the home health 

sector is utilization unrelated to a hospitalization. The commission 

has recommended a modest copayment for those episodes that don’t 

follow hospitalization, and we have published data showing that 

there are areas of the country with excessively high utilization of 

home health services and encourage the secretary to use their 

fraud and abuse authorities to examine those areas. 

The commission has also created policies that overlay fee-forservice and try to encourage coordination. For example, we have 

recommended readmission penalties for hospitals, skilled nursing 

facilities, and home health agencies that exhibit excessive readmission patterns. 

We have also made longer run recommendations to create incentives to avoid unnecessary volume and to encourage collaboration 

across the various post-acute care providers, the commission has 

called on CMS to create and examine various bundling payment 

strategies to assess patient need, to track a patient’s quality of 

care, and to eliminate the various payment systems for the postacute care sector and instead have a single unified payment system. For many years, we called for a unified patient assessment instrument. Through the past efforts on the part of the CMS and as 

the result of the recent passage of the IMPACT Act, that work appears to be underway, but there is still a lot of work to be done 

here and all of us will need to be attentive to that process. 

Beyond traditional fee-for-service, a well-functioning managed 

care program and initiatives like accountable care organizations 

can also create incentives to avoid unnecessary volume and encourage coordination, and the Commission has provided a range of 

guidance in those areas as well. 

In closing, the Commission has consistently made unanimous 

policy recommendations to move away from a siloed payment and 

delivery system that undermines care coordination and instead 

move towards one that is focused on the beneficiary and on care 

coordination, but at a price the taxpayer can afford. 

I look forward to your questions. 

9 

Mr. PITTS. The chair thanks the gentleman. 

[The prepared statement of Mr. Miller follows:] 


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Mr. PITTS. I will begin the questioning. Recognize myself 5 minutes for that purpose. 

Dr. Miller, there have been concerns raised from the home health 

industry that current legislative reductions in reimbursements 

threaten the ability of home health agencies to treat Medicare patients. In support of these arguments, they point to cost reports 

and other data that show profit margins that are either very low 

or, in some instances, negative. I think everyone wants to ensure 

the benefit and access to it remains strong. 

Have you or your staff looked into this issue? And, if so, what 

have you found and do you have any recommendations for this 

committee? 

Mr. MILLER. We have looked into it and we have reported on it 

for many years. Just to be very clear, at the front end of this answer, for many years, we have documented very high profit margins on Medicare patients in home health, in the 12, 13 percent 

range. And we stand by those numbers just to be very direct in responding to your question. 

We are the ones who made the recommendations to start to 

rebase the rates, and there is a rebasing provision in law. We believe that rebasing provision doesn’t go far enough. So I want to be 

clear about that. And I can take that on in further questions. 

But then I think what may be—your question may be about and 

what other people see is numbers like 13 percent margins for Medicare, and then the home health folks will show you a margin that 

is 2 or 3 percent. And let me just talk you through that. One thing 

that you should keep in mind is is that the home health industry 

itself acknowledges that their margins on Medicare are as high as 

we say. If there are differences there, they are differences of a matter of a few points. So if you listen in on calls with their Wall 

Street investors and that type of thing, they acknowledge that the 

margins in Medicare are very high and that that is the place that, 

you know, a business model or a line of business that they want 

to attract. 

The lower profit margin that you see reported involves a few 

things. Number one, it can involve other lines of business. So if an 

organization owns a home health line of business but owns a different line of business, the margin will reflect that. It can reflect 

lower payment rates in Medicaid and private payers, which often 

do pay less than Medicare and so their margins will be lower there. 

It can also reflect costs that Medicare doesn’t recognize as allowable, such as political contributions or taxes paid in localities. So 

I think some of the differences between those two numbers are 

those types of things. 

Mr. PITTS. As post-acute care providers look to innovate in their 

delivery model, I know that telemedicine is an issue many are focused on. In fact, it is a very important issue at our 21st Century 

cures discussion. And a number of members are working in a bipartisan fashion to advance the use of these technologies in the 

Medicare program. However, I have heard concerns that if telemedicine is not done correctly, it could lead to higher expenditures 

under the program without a similar increase in quality or service. 

What are your thoughts on that? 

29 

Mr. MILLER. I believe our view on telemedicine is that it can be 

a useful tool that providers—and not just home health providers— 

can use in order to manage a patient’s care and cut down on some 

of the overhead expense of a face-to-face type of visit. 

Our view here is that there is nothing in the payment scheme 

for Medicare that prevents a home health agency from using this 

service. And to the extent that the service makes good sense and 

helps them coordinate care and reduce their cost, they should be 

able to use that service. 

I have heard—and this might be part of your question—in other 

settings, people have been concerned that the use of telemedicine, 

depending on how it is paid for—and it really does matter how it 

is paid for—does make it easier to generate a visit or an encounter, 

if you will, and that unless it is monitored, can produce payments 

per click, if you will, that can result in higher cost. But depending 

on how it is paid in home health within an episode, I am not quite 

sure that that problem is present. 

Mr. PITTS. Well, Dr. Miller, I just wanted to personally thank 

you and your staff for the support you have given to this committee 

to its members on the issue of telemedicine. We would appreciate 

that continued support as we go forward. And I thank you. 

And I now recognize the ranking member of the subcommittee, 

Mr. Green, 5 minutes for questions. 

Mr. GREEN. Thank you, Mr. Chairman. 

Dr. Miller, I too—and we appreciate your thoughtful examination 

of the post-acute care payment reforms that MedPAC has done to 

date. 

From your testimony, it appears that the Commission has given 

some initial consideration of bundled payment design elements 

such as the scope of service covered, the time span of the care episode, and the ways to ensure quality. And there are tradeoffs between increasing opportunities for care coordination and requiring 

providers to accept greater risk beyond the care they furnish. As 

you noted, bundled payments can encourage accountability for cost 

and quality across the spectrum of care by incentivizing the provision of only clinically necessary and coordinated care. 

A recent legislative proposal of the Bundling Act, the BACPAC, 

seems to take a different approach than what MedPAC has considered. In fact, BACPAC bundle assumes a third-party entity, a coordinator, that would pay PAC providers. BACPAC would also bundle post-acute care services after a patient’s discharge from an 

acute care hospital. Conversely, MedPAC has explored global payments that would cover initial hospitalization and potentially 

avoidable readmissions in PAC services within the 90 days. So you 

are going not only from the hospital, but also to the PAC issue. 

Could you discuss the pros and cons of the two different approaches, I guess? 

Mr. MILLER. What I want to be clear in commenting on, MedPAC 

as an organization—and because we serve the various committees 

of Congress, I won’t be making any comments pro or con on any 

piece of legislation. 

Mr. GREEN. OK. 

Mr. MILLER. So my comments here will be about what we have 

done on bundling and what we think about bundling. Hopefully, 

30 

none of this should be taken as either supporting or opposing a 

specific piece of legislation. 

Mr. GREEN. OK. Well, my next question, then, wouldn’t a coordinator simply add another layer of payment to the policy? 

Mr. MILLER. That would depend entirely on how the coordinator 

is defined. So if the coordinator is one of the providers within the 

PAC continuum, no. If it is another provider outside of that continuum, that is decidedly a different actor. Whether it adds cost or 

not depends on where the money comes to pay for that coordinator 

whether it is paid out of savings or whether it is paid out of new 

dollars. 

Mr. GREEN. Well, and that’s the next question. 

But, should Congress limit the flexibility in designing what elements of care can be bundled? 

Mr. MILLER. So, I think the way I would answer that is the Commission—just to be clear, the Commission has looked at a number 

of different ways of structuring bundle. So whether it is attached 

to acute care and post-acute care, whether it is a set payment that 

goes to a particular entity or whether, in fact, you sort of draw a 

circle or a boundary around an episode and then continue to pay 

on a fee for service, we have talked through those and we have 

talked through the pros and cons of all of those. 

There is, I think, a need to be thinking about these different 

issues, but I also think that there is a point at which there will 

probably be some action required by Congress in order to move the 

bundling concept along. I think that in the past, looking at different ways either through demonstrations in different models have 

not always produced crisp and timely results for people to act on. 

I do want to also say—well, I will stop there. 

Mr. GREEN. Well, you had mentioned a response to the chairman’s questions about MedPAChas noted a number of times that 

post-acute care providers enjoy high margins and obviously investors notice that. 

Could you talk briefly about the margins that post-acute care 

providers receive for Medicare payments and what this tells about 

the Medicare’s payment for these services and if you have recommendations on how Congress should address these high margins? 

Mr. MILLER. So, and again I am just going to do this at a very 

kind of high-glide level. You are probably talking currently about 

margins that are in the, let’s call it 12 percent range for home 

health and skilled nursing facilities. Again, these are Medicare 

margins. You are probably in the 7 range for inpatient rehab facilities, maybe the 5 to 6 range or 6 range for long-term care hospitals. 

I am not sure I have that as wired in my head. 

The Commission’s view on these—and so, for example, in our 

current—our most recent March 2015 report, we recommended no 

update for inpatient rehab facilities and long-term care hospitals, 

the argument being that they can cover any increase in their input 

costs with the current level of funding that they are getting. And 

then for home health and skilled nursing facilities, we have recommended actual reductions in the rate to bring them closer to the 

cost of an efficient provider. 

Mr. GREEN. OK. Thank you Mr. Chairman. 

31 

Mr. PITTS. The chair thanks the gentleman. 

Now recognizes the vice chair of the subcommittee, Mr. Guthrie, 

5 minutes for questions. 

Mr. GUTHRIE. Thank you, Mr. Chairman. And thank you, Dr. 

Miller, for being here. 

In your testimony, you mention that different post-acute care settings treat similar patients, but Medicare pays them different rates 

depending on the setting. Can you explain why this happens and 

how much authority CMS has to fix it compared with what is in 

the statute? 

Mr. MILLER. Yes. I am probably going to be less helpful on the 

statute and what authority they have. That just may not be something I am as wired on. 

Mr. GUTHRIE. OK. 

Mr. MILLER. And again, I want to point out here that some of 

this is—the program sets these payment systems up at different 

points in time. I think that a post-acute care environment is a difficult environment for clinicians to operate in. It is a complicated 

set of decisions that have to be made. 

But if somebody comes out for—let’s say, out of the hospital for 

a given procedure, a hip replacement, let’s say, depending on the 

circumstances of the patient, they could end up in an inpatient 

rehab facility. They could end up in a skilled nursing facility. They 

could end up in entirely a home health treatment plan. Medicare 

would pay differently in those different settings. And what we have 

begun to see—and we have seen this both on the acute care side, 

which we are not talking about today, and on the post-acute care 

side, places where we feel like we are beginning to identify overlaps of patients and we end up paying very differently for similar 

patients. 

Now, I want to express some caution here. In the post-acute care 

setting, we have entered this area and we have begun to talk about 

what we think are similar sets of patients based on our research 

between the inpatient rehab setting and the skilled nursing facility 

setting. But by no means are we making very broad blanket statements that you can just pay the same in all of those settings. And 

I also want to say to, at least, one opening statement, some of the 

information that we get out of the IMPACT Act and the more consistent assessment of patients across settings will help to understand that problem better. 

Mr. GUTHRIE. OK. And you also stated that the Commission has 

frequently observed that Medicare’s payments for post-acute care 

are too high and its payment systems have shortcomings. Why do 

you believe the payments are too high and what are the system 

shortcomings? 

Mr. MILLER. OK. Some of the—why are the payments too high? 

OK. Let me take that part. And then you said shortcoming. 

Mr. GUTHRIE. And shortcomings in this payment systems. 

Mr. MILLER. OK. So why are they too high? I think a couple of 

things go on. And by the way, some of this is good. It is just not 

the payment system necessarily keeping up. 

So let’s take home health, for example. So when the home health 

prospective payment system was created, there was this decision to 

create an episode, OK. So you had an episode of care. At that point 

32 

in time, 31 visits on average were provided during that episode of 

time and a payment system was based on that. 

Over time, the the provision of health care in that episode has 

changed a lot. There is now about 21 visits provided. Now, in fairness, these visits are more skilled than the visits that used to be 

provided when there were 31. But even after you adjust for that, 

basically what it means is, is that the original base rate was set 

wrong. The industry responded, lowered the way that they were 

providing care and some of that margin was created. So, I think 

that is one of the issues. 

Some of the shortcomings, I think, was another part of your 

question. 

Mr. GUTHRIE. Yes. Right. On the payment systems. 

Mr. MILLER. It is some of these things that we have already 

touched on here, the fact that you have such different payments in 

different settings and that clearly sets signals for providers who 

might say, well, there may be some advantage to go in one direction or another direction. I mean, those are some of the shortcomings. 

I also think that there is a difficulty in, at least, in some of the 

payment systems, a clear signal to provide additional services and 

there is not a really good way, at least presently, to have a handle 

to counteract—— 

Mr. GUTHRIE. And I got real—just a couple of seconds. 

Mr. MILLER. Sorry about that. 

Mr. GUTHRIE. But the Commission, in your statement, you said 

the Commission studied difference in outcomes in SNFs and IFR 

settings but couldn’t compare risk adjusted across that. Was there 

a reason why you couldn’t do the risk adjustment? 

Mr. MILLER. OK. So, really quickly because I see we are out of 

time here. In thinking about trying to set a base payment that is 

equal between skilled nursing facility and SNFs, we looked at risk 

scores, we looked at complications in comorbidities, we looked at 

functional statuses as best as possible and zeroed in on a few conditions that we think are very similar in the two settings. 

One thing that is difficult—and this is why the IMPACT Act is 

so important—is what you really want in a perfect world is the 

same assessment applied to each patient so then you can truly 

across settings say, this patient is different than this patient and 

it is done on a common basis. That is not going on now. 

Mr. GUTHRIE. OK. Thank you. I yield back. 

Mr. MILLER. Sorry about the time. 

Mr. PITTS. The chair thanks you. Gentlemen now recognizes the 

ranking member for the full subcommittee, Mr. Pallone, 5 minutes 

for questions. 

Mr. PALLONE. Thank you, Mr. Chairman. And I thank you for 

having this hearing because I think it is very important. 

But, Dr. Miller, I was very impressed with the statements you 

have made so far because you really have been kind of urging caution in terms of how we proceed. And you have also talked about 

getting more information from the IMPACT Act, which is what I 

would like to see before we move ahead with any particular legislation. 

33 

I am just going to use an example with my dad. My dad is 91. 

He has been in and out of hospitals many times and, I guess, my 

fear in hearing some of the statements that have been made about 

having a PAC coordinator who is somehow going to benefit, either 

he or those who he services are going to benefit from some sort of 

pay back if—depending on where the patient is placed and this 

idea of just a 4 percent cut overall. These things concern me a 

great deal. 

Let me just give you an example. Many times when my father 

has come out of the hospital, for whatever reason, we have to make 

a decision, I say ‘‘we,’’ I mean collectively my brother, my father, 

myself—about where to place him. And that may be that he goes 

home and he gets home health care, or he goes and gets home 

health care for a few weeks and then he goes to the outpatient 

rehab facility or he may go to a inpatient rehab hospital, or he may 

go to a nursing home. It has often been a combination of those 

things, depending on what he was in the hospital for and what we 

think as a family is the best way to deal with that post-acute care. 

And a lot of times, those are individual decisions because there 

is great variation. Sometimes we don’t like the inpatient hospital 

because we don’t think they do a good job or we don’t like the nursing home that has been proposed because we think it is not a very 

good nursing home. And I would hate to think that those decisions 

would be made by some coordinator that I understand you would 

have input into. But I would be very concerned that those decisions 

are being made by some, you know, third party who has some sort 

of financial incentive to make that decision. 

So I just think that we have got to be extremely careful with 

these things because there is such great variation, not only in 

terms of nursing home versus home health or nursing home versus 

inpatient hospital, but the individual places. In my opinion, whether I think the nursing home or the inpatient rehab facility is better 

than one or the other has more to do with it than it does about 

whether I go to a nursing home, per se. 

So, let me just ask you some questions about IMPACT. Given 

that the Medicare program spent $59 billion on post-acute care in 

2013, I am amazed we don’t have better information about patient 

outcome service user quality of care, and it is my understanding 

that the IMPACT Act will address some of these information shortfalls. You want to comment a little more on that? Does IMPACT 

think the data gathered as a result of the IMPACT Act will be 

enough to move us forward? Does Congress need to do more to 

gather this information? And what is your general feeling about 

whether we should be getting more information before we make decisions about bundling or cutting Medicare payments? 

Mr. MILLER. OK. You said a lot in there. 

Mr. PALLONE. I know. I can spend the whole day on this because 

I deal with it every day. I am going to be dealing with it in an 

hour—as soon as I leave this hearing. 

Mr. MILLER. I know. I have a father, I have an aunt that I am 

managing. I know exactly what you are up to. 

So, let me try and do this rationally. First of all—because there 

are a couple of things I do want to comment on. First of all, the 

Commission for many years was calling for something like what 

34 

happened in the IMPACT Act and moved to a common assessment 

instrument. And we do think that the common assessment instrument and what goes on in the IMPACT Act—again, we haven’t precisely seen what will come out of that. The legislation has set 

things in process and things will have to be defined in regulation. 

But we do think that it will do a lot of good in terms of having common domains, having common assessment scales and definitions 

and timeframes and the list could go on. I don’t want to say it is 

perfect—we haven’t seen exactly what will come out of it—and that 

there is nothing else that will be needed. 

But in this area—and this is a point that I would make—I think 

like many things in life and in Medicare, there is movement with 

caution, but movement. Because the other thing that I would just, 

by matter of degree say back, is if we wait for everything, you 

know, all the demonstrations to be finished, all the incentives to be 

produced in perfection, we won’t move forward. And that has happened in the past. And I think the Commission believed there is 

some ability to move forward with caution. 

And here is the kinds of cautions I would say. Things like being 

sure that you have a transition built in so that the providers and 

the beneficiaries can respond. Be sure—and to some points that 

you were making about your own circumstances, that the person 

who—because one thing about a person who thinks about the entire episode, they can—if well motivated, can actually help the family make those decisions. Because I have stood in the hospital, too, 

had somebody say here is a list, make up your mind, what do you 

want to do? And you don’t have a lot of sense of what to do. 

Mr. GUTHRIE [presiding]. Thank you, Doctor. This is all, I mean, 

very good. And I appreciate what you are doing, but we are going 

to try to get some questions in before votes. 

Mr. MILLER. All right. 

Mr. GUTHRIE. So I appreciate that. 

Mr. MILLER. Sorry I took so long. 

Mr. GUTHRIE. And you did—it is a great discussion. 

Mr. Shimkus from Illinois is recognized. 

Mr. SHIMKUS. Well, that is OK, because I am very curious about 

the response and some of my questions were involved with that. 

Because, I think, following up on Mr. Pallone’s questions, sometimes, in essence—I don’t know the right terminology—but an advocate or someone else who could give some advice on the options 

from a practical application. The challenge is you are given a list, 

pick one, and you don’t have anybody to help you through that. 

So, I am on the flip side. I am not sure that it costs more. I think 

it may save more in time, effort, energy, and frustrations, with 

more information as someone who is doing that on a day—someone 

who is doing that on a day-to-day basis. 

I think the challenge of folks our age with older adults is that 

we don’t have the experience, and then we get thrown into it based 

upon an event and we are still juggling our lives, too. So, do you 

want to—and you were going to answer and follow up on that so 

go ahead. 

Mr. MILLER. So I don’t want to cause a nuclear reaction here—— 

Mr. SHIMKUS. Oh, this is the Energy and Commerce Committee. 

We like that. 

35 

Mr. MILLER. You are both right. OK. And I think the concern Mr. 

Pallone was mentioning is, is you don’t want somebody making 

that decision too aggressively—— 

Mr. SHIMKUS. Right. 

Mr. MILLER [continuing]. For the wrong reasons to save money. 

But on the other hand, if you can structure the payment system 

in such a way and you have risk adjusted carefully for the differences in the patient, you have quality metrics so that if a person 

chooses to stint in order to save, then that is a problem. So you 

want this person who is giving the guidance to have motivation to 

make sure that the person gets the highest quality care and to 

avoid unnecessary services. 

I think both of you can be right on this matter, but you don’t 

want to tip too far—— 

Mr. SHIMKUS. No. And I understand that. 

Mr. MILLER [continuing]. In one way or the other. 

Mr. SHIMKUS. And I appreciate that. 

The other part of the questions that we have had before is about 

necessary data, how long do you wait before you start moving forward. What data do you think is necessary and needed for additional reform before additional reforms are adopted? So what data 

is not out there that you think you need to have? 

Mr. MILLER. Well, here is what I would say. First of all, again, 

I want to say that the Commission had lots of pushing for many 

years on what ultimately ended up in the IMPACT Act. We think 

it is a good start. And so a lot of that information should be helpful. And just because I am probably not loaded enough to give you 

what data we are missing, I would say this: The other thing we can 

be thinking about is there are sets of recommendations that we 

have made that we can do now, that don’t involve bundling, which 

is not to disparage bundling at all. And you can think of less aggressive versions of bundling to start moving the providers in that 

direction. 

So think of the notion of saying I am going to define an episode 

of care. I am going to continue to pay on a fee-for-service basis and 

there are various mechanisms you can put in place to be sure that 

you don’t overpay, and then the providers are beginning to move 

to the bundle concept without actually having a hard, in-place, 

here-is-the-boundaries, here-is-the-payment kind of bundle. And I 

would encourage that because that will produce information as 

well. 

Mr. SHIMKUS. So let me follow. I mean, you are right. It is like 

we choreographed this a little bit, which we did not—— 

Mr. MILLER. We did not. 

Mr. SHIMKUS [continuing]. For the record. 

Mr. MILLER. I have never seen you before. 

Mr. SHIMKUS. But how should CMS or Congress, then, accomplish the recommendation of this? I mean, so you are saying we 

should, so how should we or CMS? 

Mr. MILLER. Yes. So, I mean, the kinds of things, I think, the 

Commission would say is you should keep work going on looking 

at bundling and more of the structure types of approaches to bundling that, I think, some people are talking about, but at the same 

time also be thinking about mechanisms that begin to bring proVerDate Nov 24 2008 14:49 Sep 11, 2015 Jkt 037690 PO 00000 Frm 00041 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-31 CHRIS
36 

viders together. Some of them are more rudimentary, such as saying, if there is a lot of readmissions here across this set of providers, all of you are going to feel an effect. And so you are not saying you are in a bundle, you are not being paid by a single entity. 

But, if my actions result in a readmission, you and I are both going 

to feel it. Those types of things, and we have recommended on that 

front. 

And then the other thought that I am trying to get across—but 

I am not sure I am doing it particularly well—is begin to say to 

that set of actors, I am now going to start looking—I am making 

this up—we are now going to look at what happens over 60 days 

in a totality type of way and if you, in terms of outcomes and payments, if you do well or do poorly, your payments will be affected 

that way. In a sense, it is like injecting the ACO or the Accountable Care Organization concept—— 

Mr. SHIMKUS. Right. Right. 

Mr. MILLER [continuing]. Into more of the episode concept, if you 

will. 

Sorry if I took too much time. 

Mr. SHIMKUS. No. Good. 

Mr. GUTHRIE. Thank you. The chair now recognizes Dr. Schrader 

from—or Dr. Schrader from Oregon for 5 minutes for questions. 

Mr. SCHRADER. Thank you, Mr. Chairman. Appreciate that. You 

know, I do some of this post-acute care myself, but I am a veterinarian. So it is a little easier to do that way. 

Along those lines, I guess, a question I have—looking at the IMPACT Act reviewing, I mean, that is a long-term project potentially 

and I am not sure we want to wait until 2024 whenever all that 

is done. 

Is there some earlier date by which the committee or Congress 

should be informed by some of the information we are gleaning 

that you think would give us an opportunity to move forward in a 

very thoughtful way on this bundle payments thing? 

Mr. MILLER. Yes. Unfortunately, we have a couple of mandated 

reports as a result of the IMPACT Act, and one of them is on a 

very short timeframe, and so hopefully we can give you some sense 

there, out of that report. 

Mr. SCHRADER. And what is that timeframe again? 

Mr. MILLER. Next summer, I am disappointed to say. 

Mr. SCHRADER. Next summer. OK. OK. And then you have been 

talking about margins quite a bit. How are you calculating those 

margins? In other words, if I go to my skilled nursing facility or 

rehab group, are they going to agree with your assessment of the 

margins out there? 

Mr. MILLER. No, they are not—— 

Mr. SCHRADER. And why would that be? 

Mr. MILLER [continuing]. To answer your direct question. 

I’m sorry. I shouldn’t be facetious. I don’t think our margins are 

mysterious at all. They come out of the Medicare cost reports that 

your skilled nursing facility or whomever else, home health agency, 

fills out. There are rules about what costs and how they are allocated, and then we calculate the cost and then we calculate the 

payments that a facility—— 

37 

Mr. SCHRADER. And how is theirs going to be different? You 

know, when they are calculating their margins, how are they going 

to be different than what the model you are using? 

Mr. MILLER. Well, what home health and the skilled—well, what 

the skilled nursing facility argument goes like this. This is the 

most common argument, OK. We recognize that Medicare margins 

are in the range that MedPAC says, 11 or 12 percent, but Medicaid 

and the private sector are paying us less. We are not earning as 

much money there. Our margins are much lower and, I think, the 

total margin is something like in a 2 percent range there. And then 

they say, you should pay more because you are basically cross-subsidizing these other payers. 

The Commission’s position on that is you are the Congress of the 

United States, you control the pursestrings, you can decide how 

dollars are allocated, but you should be clearly conscious that what 

you are doing is saying, this Medicare dollar is now subsiding dollars in the States or in the private sector and we think that that 

is, you know, at least a big question that should be faced head on. 

Mr. SCHRADER. All right. In the ACA, there were some demonstration projects on bundled payments and that it included, not 

just acute care, but some of the skilled nursing. You indicated, I 

think, that that was kind of a token. What are we learning from 

that, if anything, and if—— 

Mr. MILLER. Right. 

Mr. SCHRADER [continuing]. It is not giving us the information 

we want, what should we be asking to get from what we are doing 

hopefully in the near future? 

Mr. MILLER. Yes. And the second part of your question—or this 

question I probably want to think about a little bit more. But what 

I guess I am concerned about—and you did pick up on this. So, for 

example, in the bundling demonstration, there were many thousands of actors who said, ‘‘I am interested in understanding my experience in bundling.’’ And then it comes to the second phase that 

says and ‘‘How many of you would be willing to take risk?’’ And 

that drops immediately to the hundreds, OK, or even the 100. 

Then it says, ‘‘Which of the conditions are you willing to be at 

risk for?’’ And that comes to two or three. And so, in a sense, you 

had, ‘‘I am really interested in looking at this.’’ How much risk 

would you be willing to take risk and then for what? And then you 

are down to relatively small numbers. And my concern—and I 

think the Commission’s concern—is this process isn’t going to 

produce a very clear set of models and a clear set of generalities 

to say, OK, here is the direction to go. 

And I think what the Commission needs to do is, given that environment, try and bring the committees of jurisdiction some structure in order to say what do you do if that information doesn’t arrive in a very crisp and clear way. 

Mr. SCHRADER. Real quick. And you may not be able to answer 

it in time. But it seems like with the Accountable Care Organizations or, in my state, the Coordinated Care Organizations, they are 

willing to take a lot of risk. Can’t they deal with the bundled payments also for post-acute care as well as acute care? Do we need 

another organization or outfit to do this? 

38 

Mr. MILLER. This is a really good question. And part of the reason the Commission on the bundling front—I am going to answer 

this in the time. Well, apparently not. 

But either way, this is a really good question because the Commission has two different views on this. Some people say—and not 

just the Commission—why not move to more of a population-based 

model, like an Accountable Care Organization, and then maybe the 

episodes continue as a payment mechanism in those, but maybe 

they are superseded by the fact that you actually have a population 

model management. 

Mr. SCHRADER. Yes. OK. Thank you. 

And I yield back. 

Mr. GUTHRIE. Thank you. Gentleman yields back. 

The chair recognizes Dr. Murphy from Pennsylvania for 5 minutes. 

Mr. MURPHY. Thank you. Welcome, Dr. Miller. It is good to have 

you here. 

What MedPAC has looked at and what we are talking about here 

are patients with a similar clinical condition receiving similar 

treatments from different providers at different locations for different costs. Am I correct? 

OK. So has MedPAC ever looked at the issue of patients in a different way, the same clinical conditions, receiving the same treatment from the same provider at the same location for different 

costs? 

If you would like to—I can give you a little more detail. Would 

you like some more details first? 

Mr. MILLER. Yes. I am definitely trying to hear you. 

Mr. MURPHY. OK. I put anecdotally about cases where a patient 

received, for example, chemotherapy from a physician that was 

billed as a physician-based practice. 

Mr. MILLER. OK. 

Mr. MURPHY. And then that same patient was seen by the same 

doctor, for the same treatment, at the same location and was billed 

as hospital outpatient treatment at an incredible markup price 

after that office became part of a larger healthcare system. Are you 

familiar with that? 

Mr. MILLER. Oh, yes. 

Mr. MURPHY. How widespread is this practice? 

Mr. MILLER. OK. We have looked at this. I can’t give you just a 

flat out number, here is how widespread this is. However, we have 

looked at specific sets of services, not the one you have raised, but 

specific sets of services and seen the shift in billing basically from 

the physician office stream to the outpatient stream and it is as 

you describe. I am going to the same physician office I went to, I 

am seeing the same set of physicians, I am getting the same service and now the bill is being run through a different payment system, the outpatient hospital payment system, because the hospital 

has acquired the practice and the markups can be very—or the 

payment increases can be very high and, of course, the beneficiary’s 

copayment goes up commensurately with that. 

Mr. MURPHY. Precisely. 

Mr. MILLER. We made two recommendations in this area on sets 

of services that we identified, and they met certain criteria which 

39 

I won’t take you through because of time and all of that. Because, 

again, we wanted to be careful that we didn’t undercut the hospital’s mission, but at the same time this particular phenomenon, 

we felt, was not good for the taxpayer, not good for the beneficiary 

particularly when we are talking about the same service, same provider. 

Mr. MURPHY. Sure. So we have heard examples, for example, 

where someone was getting oncology treatment, chemotherapy, 

that, in one instance, may cost $10,000. When the hospital acquires 

the practice, it is billed at $30,000. 

Mr. MILLER. I am—yes. 

Mr. MURPHY. We have heard similar things for a dermatological 

procedure, et cetera. And then a person’s copay may have a several 

thousand dollar difference as well. So it currently is legal. Am I 

correct? 

Mr. MILLER. Yes. 

Mr. MURPHY. Is it ethical? 

Mr. MILLER. The Commission has raised great concerns with this 

practice. 

Mr. MURPHY. Do you wonder if it is ethical? 

Mr. MILLER. Say it again. 

Mr. MURPHY. Is it ethical that someone has found this loophole 

and is—— 

Mr. MILLER. I will speak only for myself, not the 17 commissioners, OK. No. I see this as a problem. 

Mr. MURPHY. Thank you. 

So, previous MedPAC analysis has shown that hospital-based reimbursements is much higher, as we said, and paying the doctor 

more than a nonhospital affiliated facility. 

Mr. MILLER. I’m sorry. Would you—— 

Mr. MURPHY. Sure. I have a cold, and so it is hard for me to—— 

Mr. MILLER. I apologize. 

Mr. MURPHY. That is OK. I am sick. But what am I going to do? 

See a doctor? 

Mr. MILLER. And I am a little nervous. 

Mr. MURPHY. Anyways. 

So I am paying the doctor more and charging a senior more for 

same service at a nonhospital affiliated facility. Can you comment 

on what degree a similar dynamic is differentiated payments? You 

may be operating in the post-acute space and its relationship to 

costs for seniors and potential consolidation of treatment facilities 

similar to those we have seen in the cancer setting. 

Mr. MILLER. I now do understand what you are saying, and often 

the beneficiary difference in the post-acute care setting is not as extreme as you see in the acute care setting. So in the acute care setting when somebody—and this is why, when you asked your very 

pointed question, I see problems here. The beneficiary is paying 20 

percent of whatever happens, as a general rule. 

In the post-acute care setting, it is a little bit murkier. So let’s 

take—and actually it may not be as much of an issue for the beneficiary. Let’s take the inpatient rehab facility and the skilled nursing facility. The beneficiaries generally retire their in patient admission deductible and they go to these facilities. Unless they stay 

for long periods of times, they don’t necessarily have a copayment 

40 

that goes along with it. So the circumstances are actually just a little bit more—a little less—they are not as consistent as you see on 

the acute care side. 

Mr. MURPHY. OK. Thank you. I know I am out of time, but I just 

hope we continue to work with you to get more information on that 

process I spoke about, what those net costs may be costing Medicare as well as seniors with copays. I am sure as you go through 

this—and Mr. Chairman, I hope we can get that information and 

report that back. 

Mr. GUTHRIE [presiding]. Thank you. The gentleman’s time is expired. We are really pushing votes. Let me recognize the gentlelady 

from California, Ms. Matsui. 

Ms. MATSUI. Thank you, Mr. Chairman. And Dr. Miller, thank 

you very much for your testimony. This is somewhat similar but 

not really talking about hospitals here to Dr. Murphy’s questions. 

Under the current Medicare payment systems, there are no financial incentives for hospitals to refer patients to the most efficient or effective setting so that patients receive the most optimal 

but lowest cost care. Whether a patient goes to a home health 

agency or a skilled nursing facility, for example, seems to depend 

more on the availability of the post-acute care settings and their 

local market, patient and family preferences or financial relationships between providers. 

Now, putting aside what Dr. Murphy was concerned about, and 

I think we all should be concerned about that, but if we proactively 

look at this, since patients and also, too, the hospitals have a role 

in this because they don’t want the readmittance either, so look at 

that, too, but since patients often access post-acute care after a 

stay in the hospital, how can we best harness the hospitals to help 

ensure patients receive care in the right setting after a hospital 

stay? 

Mr. MILLER. OK. I think there is a couple of things to say here. 

Number 1, there is, I think, one of the reasons the Commission 

said there should be—and part of the problem of making a bad referral is, is that the patient had some complication or bed sore or 

something and bounces back. 

Ms. MATSUI. Right. 

Mr. MILLER. And so one of the reasons that the Commission, I 

think, took this position of the hospital, the skilled nursing facility, 

and the home health should all feel a readmissions penalty if a readmission occurs, is to try and build in—the hospital needs to be 

conscious of it but also the hospital’s partners—— 

Ms. MATSUI. Partners. 

Mr. MILLER [continuing]. Or implicit partners should be conscious as well to try and militate against that. 

A second thing that goes on is there is something called the 

Medicare spending payment per beneficiary. This is a very arcane 

thing, but it is buried deep in the value-based performance metrics 

that hospitals are judged by, and so to the extent that that has 

some impact on their payment, they are paying attention to the 30 

days that followed the discharge. But there again, if you are a hospital, you sort of say, you are holding me responsible, but there is 

all these other actors, how do we bring them into it. 

41 

And that is what gets us to some of the things that we are discussing today, whether you start thinking about payments affects 

that cut across like what I will call loose bundles or hard bundles, 

depending on what kind of model we are talking about, and then 

of course the level above that is if there is an accountable care organization that the hospital is a part of—— 

Ms. MATSUI. Right. 

Mr. MILLER [continuing]. Then obviously it has those incentives 

kind of built into that. 

Ms. MATSUI. So we are taking those steps now to have the responsibility sort of be more than implicit in a sense. 

Mr. MILLER. I think there are still steps to be taken, but absolutely. So, for example, the Congress has implemented readmission 

penalties for hospitals and skilled nursing facilities but not home 

health. 

Ms. MATSUI. Exactly. 

Mr. MILLER. My understanding is home health and the skilled 

nursing facility, or associations and environments agree that there 

should be readmission penalties. The details—— 

Ms. MATSUI. The devil is in the detail. 

Mr. MILLER [continuing]. We probably disagree on but that 

would be usual. 

And then there are—I also want you to know this. And actually 

the whole committee to know this. There are discussions in the 

Commission. These are very—it is public. It is in the transcript, 

but we haven’t jelled on it of, should there be some greater steering 

on the part of the hospital if the provider is being steered to have 

high quality rankings, that type. 

Ms. MATSUI. That is what I was—— 

Mr. MILLER. I kind of thought you were going there. 

Ms. MATSUI. Yes, going toward. I have quickly, another question. 

What about those beneficiaries that access post-acute care without 

a hospital stay? 

Mr. MILLER. There is something of a different ballgame there. 

Ms. MATSUI. Yes. 

Mr. MILLER. The community admits are sometime—the words 

there. There is something of a different ballgame there in the sense 

of that beneficiary, it’s potentially more difficult for the program to 

figure out whether we have a needed service there because the person doing the admitting—I don’t want to overstate this, but the 

person doing the admitting in some instances is the person who is 

going to benefit from the admission in terms of the provider. 

Now, you can be referred by community physicians, of course, but 

there are also decisions made by the particular provider to take a 

person in to continue to add episodes of care, for example, in a 

home health setting. 

Ms. MATSUI. OK. 

Mr. MILLER. And so I think some of the things we might need 

to think about there is whether the beneficiary bears some small 

portion of the cost so that the decision is not just completely openended to the beneficiary. 

Ms. MATSUI. Sure. 

Mr. MILLER. And whether there needs to be some ability to look 

at prior authorization, that type of thing. 

42 

Ms. MATSUI. OK. Well, thank you very much, Dr. Miller. My time 

is up. Thank you. 

Mr. GUTHRIE. Thank you. The gentlelady yields. Be advised we 

are in votes now, so we will probably be able to get to one more 

5-minute set of questions. Then we will reconvene following votes, 

probably about 12:15 we walk off the floor. 

Mr. Griffith, from Virginia. 

Mr. GRIFFITH. Thanks. And I will try to be brief. 

And I am going to go off on a little bit of a tangent. When I was 

in the Virginia State legislature and then subsequent to that, 

North Carolina, adopted zoning requirements that would allow med 

cottages to be placed in somebody’s back yard if a member of their 

family had medical needs that required two or more procedures a 

day. And the estimates were that this would save a lot of money. 

Of course, it is not paid for by the Federal Government at this 

time. 

And I would just ask that you all look into it because the concept 

is, is that you would build a hospital room in a mobile facility— 

basically the mobile home manufacturers love the bill for that reason because they would get this, but it would allow somebody like 

myself, if I were to suddenly have a major problem to stay in with 

my loved ones. And we had testimony in Virginia at the time that 

there was a young man who was 8 or 9 years old who was dying 

and his parents wanted to be with him, but they couldn’t get a 

medically appropriate place for him in his rural community, and so 

the parents had to both quit their jobs and spend the last few 

months with him in a hospital room in Charlottesville, Virginia. 

I think this is a concept that both saves money and is compassionate. It helps patients stay with their loved ones if they can, not 

necessarily in the hospital, but where they can have some treatment brought to the home where that is possible, in lieu of having 

a nursing home bed perhaps, but with the number of nursing home 

folks shouldn’t be too opposed to it, and weren’t at the time, because they see the market expanding so much that this niche 

would be there. 

Just ask you to think about it. I think it is something for the future, and I would appreciate it if you all would take a look at this 

concept and be happy to give you any information that you need. 

Mr. MILLER. OK. I appreciate that. 

Mr. GRIFFITH. And with that, Mr. Chairman, and many questions 

already having been asked and answered, I yield back. 

Mr. GUTHRIE. Thank you. Yield back. And since you yield back 

some time, I am going to recognize the gentlelady from Florida, Ms. 

Castor. 

Ms. CASTOR. Thank you, Mr. Chairman. 

Dr. Miller, whenever we are talking about payment reform, I am 

always concerned that we are appropriately accounting for the complexities and differences among patients. I believe that if we move 

forward to reform in the post-acute care setting, we should be looking to make sure that we appropriately adjust provider payments 

to reflect beneficiary risk. Every—and personal conditions, and it 

kind of follows on what Mr. Guthrie was asking about. 

Could you give us a—quickly, a little greater detail, do you believe a risk adjustment is an appropriate issue to focus on and 

43 

what steps do we need to take, for example, in developing a bundled payment that would appropriately account for differences in 

beneficiaries? 

Mr. MILLER. I do think it is an incredibly important point. I 

think—and regardless of what kind of payment system we are talking about, you need to get the risk—you need to get risk adjustment straight so that providers don’t have an incentive to avoid the 

most complex patients. And a lot of our work has been focused on 

that in different settings of trying to adjust the risk and the payment systems to fix those very kinds of problems. And so you do 

need it. 

I think again, the data that will come through the IMPACT Act 

will help, but we are not completely without abilities to do that 

now. And one—I want to say one other thing before I say that. The 

other thing you want to do to help mitigate risk is have quality 

metrics so that if you really don’t treat a patient well, the signal 

comes back through your payment, and then also you can do it 

through insurance functions, things like this. 

It is an episode payment, but if you have an outlier, then there 

will be a payment that comes in behind that. So that the person 

realizes a patient is going south or potentially could go south, they 

aren’t completely exposed to that. And that also helps them make 

more willing to take the complicated patient. 

So I think, in answering your question, risk, absolutely important, don’t forget, and I know you haven’t, but quality feeds into 

that, and then an insurance structure in addition to that like an 

outlier payment all helps try and mitigate the concern which I 

think is you don’t want them avoiding the most complicated patients. And I think there are bundles of mechanisms you can kind 

of think about. Anyway, I will stop. 

Ms. CASTOR. Thank you. 

Mr. GUTHRIE. Thank you. The gentlelady yields back. And I believe we concluded the questions for the first panel, but the committee will recess, and once we recess, we will reconvene following 

the last vote, and we will commence with the second panel at 

that—we will begin with the second panel at that time. The committee is in recess until call of the chair after the final vote. 

[Recess.] 

Mr. PITTS [presiding]. Ladies and gentlemen, if you will take 

your seats, we will get started. Thank you very much for your patience with the vote, and then before that, I had to duck out for 

the signing, the enrollment ceremony for the SGR which is a nice 

little celebration. 

So, we are back now with the second panel, and I will introduce 

them in the order that they speak. Dr. Steven Landers, president 

and CEO of the Visiting Nurse Association Health Group, Dr. Samuel Hammerman, chief medical officer of the LTACH Hospital Division at Select Medical Corporation, Dr. Melissa Morley, program 

manager of health care financing and payment at FTI International, and Mr. Leonard Russ, principal partner at Bayberry 

Health Care and chairman of the American Health Care Association. 

44 

Thank you each for coming. Your written testimony will be made 

part of the record. You will each be given 5 minutes to summarize 

your testimony. 

And we will begin with you, Dr. Landers. You are recognized for 

5 minutes for your opening statement. 

STATEMENTS OF DR. STEVEN LANDERS, MPH, PRESIDENT 

AND CEO, VISITING NURSE ASSOCIATION HEALTH GROUP; 

DR. SAMUEL HAMMERMAN, CHIEF MEDICAL OFFICER, 

LTACH HOSPITAL DIVISION, SELECT MEDICAL CORPORATION; MELISSA MORLEY, PH.D., PROGRAM MANAGER, 

HEALTH CARE FINANCING AND PAYMENT, RTI INTERNATIONAL; AND MR. LEONARD RUSS, PRINCIPLE PARTNER, 

BAYBERRY HEALTH CARE, CHAIRMAN OF AMERICAN 

HEALTH CARE ASSOCIATION 

STATEMENT OF DR. STEVEN LANDERS 

Dr. LANDERS. Thank you, Chairman Pitts, Mr. Shrader. Thank 

you, Mr. McKinley for your leadership on this issue and honored 

to be here with my home State Representative Pallone. 

Today’s hearing is timely and needed. Seniors are being discharged from America’s hospitals and finding themselves often in 

a poorly coordinated and costly post-acute care continuum. Sometimes instead of order, there is disarray. Instead of teamwork and 

clear care paths across venues, there is fragmentation and confusion. Instead of efficiency, unnecessary costs are being borne by patients in the Medicare program. 

My organization, VNA Health Group, serves some of the oldest 

and frailest Medicare beneficiaries. As a result, we have seen firsthand how bewildering and burdensome the current situation can be 

for ailing seniors and their families. I think of an example, Patient 

Mrs. Smith, an 82-year-old woman with arthritis, congestive heart 

failure, and low vision, being discharged from a hospital where she 

had recently been treated for a broken hip caused by a fall. She has 

received some information but is still in pain and sleepy, and she 

and her family aren’t sure of what to do. Her daughter, her main 

care giver, isn’t sure who is going to be in charge after she is discharged and who to go to with questions. 

Mrs. Smith and people like her have some basic but important 

needs, including a comprehensive and holistic assessment of her 

post-hospital needs and circumstances, help accessing the care that 

she needs that is right for her condition, the support of a cadre of 

professionals like nurses and therapists and social workers and 

physicians, short-term assistance with activities of daily living and 

basic living nutrition. Her story is not atypical. People like her are 

being discharged from hospitals each day across our country. They 

are our parents, our grandparents, aunts and uncles, and soon they 

may be us. 

If Mrs. Smith and seniors like her receive the coordinated care 

that they need, they will recuperate more quickly at a lower cost 

with lower risk of rehospitalization, but too often this isn’t the case, 

and people aren’t getting this type of care. Older Americans like 

Mrs. Smith don’t have what they need most, which is patient-centered care coordination. This means having a partner that is truly 

45 

invested in helping them get better soon, a physician and nursing 

team by their side across care venues, integrated electronic information systems that will help avoid adverse events. 

We believe that patient-centered care coordination can be 

achieved through PAC bundling that adapts a successful DRG 

model and provides consistent coordination and navigation support 

to discharge beneficiaries and their families. It is for this reason 

that the Partnership for Home Health—for Quality Home Health 

is proud to support the BACPAC Act. The BACPAC model incorporates elements that we feel are important to patient-centered 

care coordination. A model on diagnostic related groups, which 

have been in use for over 30 years, creates condition related groups 

to align interests and improve outcomes, ensures patient choice, 

network adequacy, and the use of clinical and technological innovations to improve care. It uses powerful risk and saving incentives 

to prioritize high quality coordinated care, and it strengthens program integrity because no coordinator is going to want a bad or 

fraudulent actor to be in its network. It aligns with Congress’ passage of the IMPACT Act, which created a unified PAC assessment 

tool and achieves significant savings without cutting any providers’ 

rates or increase in costs for any seniors. 

There are many complex issues to be addressed, and as you do, 

please keep seniors like Mrs. Smith in mind so that Medicare postacute care policy will not only be improved but work for the most 

vulnerable among us. Thank you. 

Mr. PITTS. The chair thanks the gentleman. 

[The statement of Mr. Landers follows:] 

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Mr. PITTS. Dr. Hammerman, you are recognized for 5 minutes for 

your opening statement. 

STATEMENT OF DR. SAMUEL HAMMERMAN 

Dr. HAMMERMAN. Good afternoon. Thank you, Chairman Pitts 

and Ranking Member Green for holding today’s hearing on the future of American post-acute care. My name is Dr. Samuel 

Hammerman. I am the chief medical officer of Select Medical’s 

long-term acute care hospital division. I oversee more than 100 

LTACH hospitals in 30 States. 

I will try to offer some insights today based on my experiences 

and based on the experiences of the company I am proud to serve 

as the chief medical officer for, Select Medical. Select Medical is 

based outside Harrisburg, Pennsylvania, and is one of the largest 

providers of post-acute care in the country. Besides the 100-plus 

LTACH hospitals, Select Medical also operates about 20 inpatient 

rehabilitation hospitals, and 1,000 outpatient therapy clinics. All 

together, Select Medical employs over 30,000 Americans in more 

than 30 States. 

Let me begin by saying that Select Medical does not oppose a 

bundled post-acute payment system. With this in mind, my observations on our post-acute care systems are as follows. I want to 

stress that Congress has already enacted extensive legislation laying the foundation for bundled payments for post-acute services. 

Just last fall, Congress passed the IMPACT Act of 2014. This law 

will enable Congress to develop an informed and evidence-based 

post-acute bundling system. We were happy to support this bipartisan bicameral bill. 

The IMPACT Act will provide the Centers For Medicare and 

Medicaid Services and Congress with the necessary information, 

design a post-acute care payment system that stresses quality of 

care while maximizing efficiencies in the delivery of care. I salute 

Congress for moving to a new system while ensuring continued 

beneficiary access to the most appropriate setting of care. 

On a similar note, I would note that the Affordable Care Act of 

2010 established a number of new programs. It has post-acute bundling in hundreds of sites across the country. CMS is currently in 

the midst of numerous pilot programs testing numerous bundle 

payment concepts. In short, Congress and CMS have already largely commissioned a bundled future for post-acute care. 

As a physician, I feel compelled to note that the current postacute system still has many virtues. I would still make the case 

that the post-acute continuum of care represents a fairly logical 

and rational progression of care. Yes, we need to address the issue 

of readmissions, and yes, policymakers should always be concerned 

about whether care is appropriate and medically necessary. 

As a historical aside, I ask you to consider that only about 10 

percent of Medicare spending is devoted to post-acute care, and 

please recall how the post-acute sector came into being in the first 

place. In 1983, the Medicare program adopted the first prospective 

payment system which greatly encouraged hospitals to discharge 

patients more quickly. 

Post-acute, as we know it today, only came into existence because 

of the incentives todischarge quickly from general hospitals. My adVerDate Nov 24 2008 14:49 Sep 11, 2015 Jkt 037690 PO 00000 Frm 00063 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-31 CHRIS
58 

vice to Congress is that you try to preserve a range of post-acute 

providers that offer a range of services from lower acuting nursing 

homes to higher acuity post-acute hospitals like rehabilitation hospitals and LTACH hospitals. All play a distinct role in meeting the 

needs of the American patient population. 

One public policy issue important to both taxpayers and postacute providers is ensuring that patients are cared for in the most 

appropriate setting. We agree that patients who can be safely and 

effectively cared for in sometimes less costly facilities like nursing 

homes should not be treated and paid for in rehabilitation hospitals 

and LTACH hospitals. 

Little more than a year ago, Select Medical supported a new law 

passed by Congress designed to ensure that only appropriate patients are admitted to LTACH hospitals even though the law also 

significantly reduced Medicare reimbursement for these facilities. 

My larger point is that post-acute providers will continue to work 

with Congress to ensure that Medicare cost savings are achieved 

and beneficiary access to appropriate care is preserved. 

Finally, I was asked to comment specifically on Congressman 

McKinley’s BACPAC bill. BACPAC has some positive attributes, 

but it does not address many core elements of a bundled payment 

system and leaves these to the HHS Secretary to develop. Given 

the BACPAC’s gaps, details on payment rates, a payment process, 

provider network requirements, a patient assessment process, and 

quality standards, the BACPAC bill appears to leave a great deal 

of policy work to CMS. This results in unanswered questions about 

how BACPAC would actually work in the real world. More importantly, we have concerns about the BACPAC bill because we feel 

it would shortcut the comprehensive payment reform processes 

that Congress launched in 2010 under the ACA and built upon in 

2014 with the IMPACT Act. 

Rather than supporting the IMPACT plan to first test bundling 

in the marketplace on a small scale, BACPAC would cut short this 

process. And given the complexity of the issues, this process is 

needed to develop a reliable and evidenced-based bundled payment 

program for post-acute care. Thank you. 

Mr. PITTS. Thank you. 

[The statement of Mr. Hammerman follows:] 

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Mr. PITTS. Dr. Morley, you are recognized for 5 minutes for opening statement. 

STATEMENT OF MELISSA MORLEY, PH.D 

Ms. MORLEY. Chairman Pitts, Ranking Member Green, and 

members of the subcommittee, thank you for the opportunity to 

speak with you today. Since 2007, I have worked on several 

projects with the assistant secretary for planning and evaluation 

and CMS looking at both the composition of PAC episodes and the 

potential to predict episode spending using patient assessment 

data. On the basis of my experience conducting research in this 

area, I will highlight several relevant findings and note data and 

analysis required to move this payment approach forward. 

The proportions of Medicare beneficiaries discharged to PAC, episode utilization and spending differs significantly across the United 

States because of varying practice patterns and availability of PAC 

providers. Differences in provider supply, particularly with regard 

to long-term care hospitals, LTACHs, and inpatient rehabilitation 

facilities are key drivers of differences in overall episode spending. 

Establishing an episode-based payment requires an understanding of service use and spending on average; however, this is 

challenging when considering high cost but low-frequency services 

such as LTCH. For example, although only 2 percent of beneficiaries discharged to PAC use LTCH services, the mean cost for 

those using LTCH is over $35,000. When this spending is averaged 

over all PAC users, the mean cost is less than $700. This demonstrates a challenge in establishing a payment rate that is sufficient to accommodate the range of PAC services. 

To build a payment system for PAC episodes that is risk adjusted 

based on patient characteristics, standardized patient assessment 

data are critical. However, standardized assessment data are not 

currently collected across PAC settings. As part of exploratory work 

with ASPE, we have examined the potential to develop risk adjustment models using items from the CARE data collected as part of 

the post-acute care payment reform demonstration. 

These efforts have demonstrated the potential to use CARE 

items as risk adjustors to predict episode spending. Results of this 

work also highlight important differences in the predictive power 

of the models, depending on the first site of PAC. This foundational 

work is valuable in demonstrating the potential to use CARE items 

in an episode-based payment system, but additional data are needed to test the models on larger samples and to examine any differences in significant risk adjustors across diagnosis groups. 

With the passage of the IMPACT Act, more data may become 

available over the next several years, although it is not clear at 

this time which items will be collected across PAC settings and 

whether the data that will be collected will be sufficient for the 

purposes of building an episode-based payment system. 

Addressing the complexities of an episode-based payment system 

will require additional analyses as well as consideration of the results of the evaluation of the CMS Bundled Payments for Care Improvement initiative. The BPCI initiative is currently testing 

whether a bundled payment can reduce cost while maintaining or 

improving quality of care for Medicare beneficiaries. 

64 

The first evaluation report is an early assessment based on one 

quarter of data; however, results of analyses looking at cost shifting to the post-bundle period, beneficiary outcomes, using assessment data, and beneficiary experience using surveys are expected 

in future reports. Evaluation results comparing PAC service-only 

episodes with more integrated episodes that include both the acute 

hospitalization and PAC services will also provide valuable information on provider incentives across episode definitions. 

The foundation of an episode-based payment system is the diagnosis groups on which payments are made. Significant analyses 

and input from clinicians will be needed to develop the categories 

of diagnoses and to define unrelated readmissions. Analyses to develop payment adjustments for geography will be important to address differences in provider supply and in cost of care across geographic areas. Consideration of provider networks and resources to 

support beneficiary choice will also be important. 

Another consideration is related to the establishment of payments for services that continue past the end of an episode period. 

End-of-episode patient assessment data could not only support any 

post-episode service payment but also could be valuable information for ensuring quality of care. Episode-based payments offer the 

opportunity to coordinate across settings to provide care more efficiently and with greater beneficiary focus. The results of the ongoing analyses in the BPCI evaluation as well as availability of national standardized patient assessment data will be very important 

to moving this payment design forward. 

Thank you for the opportunity to speak with you today. 

Mr. PITTS. Thank you very much for your testimony. 

[The statement of Ms. Morley follows:] 

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Mr. PITTS. Mr. Russ, you are recognized 5 minutes for your opening statement. 

STATEMENT OF LEONARD RUSS 

Mr. RUSS. Well, thank you, Chairman Pitts, and thank you, 

Ranking Member Green, and members of the committee. I will be 

speaking somewhat extemporaneously and divert somewhat from 

my prepared remarks only because I think the testimony as written is in the record. 

I would like to say at the outset, I am Len Russ, I am current 

chairman of the American Health Care Association. We represent 

nearly 13,000 skilled nursing facilities around the country, serving 

more than 2 million Medicare beneficiaries each year for short-term 

stays. 

At the same time, our members are also hybrids. We also deal 

with the long-term population. We are also serving Medicaid patients, and I think, alluding to what was the earlier testimony 

today, that margin that we constantly focus on, we have to look at 

the real margins because we are taking care of a hybrid kind of 

population, all of which fall under the umbrella of our Nation’s frail 

and elderly. 

We, as skilled nursing facilities under the Medicare system, are 

one of the remaining sectors that still are paid basically on a feefor-service system. The fee-for-service model that we currently 

enjoy is the prospective payment system. The prospective payment 

system has been in existence now for the better part of more than 

a decade, and has been subject to many criticisms, tinkering by 

CMS, et cetera, for the fact that there has been concern that there 

was an over-delivery of certain services at the expense of the 

under-delivery of others. 

We at HCA champion the notion of healthcare reform. We believe 

in payment reform, and we have come up with a proposal ourselves 

to change payment reform for our sector as possibly a building 

block towards bundling. We do not believe that this current 

iteration of bundling is workable. We don’t believe that the opening 

up of the conveners or third-party managers of a bundle will do 

anything to manage care but more likely just manage payment. 

And as we have heard throughout the day, we talked about the, 

you know, breaking down silos, I think we need to be very mindful 

that by simply breaking down a payment cycle doesn’t necessarily 

break down the care delivery system. That coordination is not always in line with simply realigning the payment system. 

So having said that, we at HCA have come up with basically six 

principles by which we think any bundling proposal or largely any 

healthcare reform proposal needs to adhere to. The first is that 

with any post-acute care sector, the management of that bundle 

really should be left with the providers in the post-acute care 

space. So that hospitals, which the BACPAC bill would still allow 

to be the sort of care coordinator or third-party conveners, which 

might siphon off precious dollars from the payment into their own 

pocket, so to speak, for allegedly managing the care, whereas they 

are just managing the dollars, is probably not productive. 

We also believe that smaller providers, and our organization represents very large corporations as well as regional companies, indeVerDate Nov 24 2008 14:49 Sep 11, 2015 Jkt 037690 PO 00000 Frm 00079 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-31 CHRIS
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pendent owners like myself do not have the economic muscle to be 

able to take on the kind of risk that would be required in order to 

become a care coordinator. So this is not going to present us with 

a level playing field. 

Secondly, we want to be sure that Medicare beneficiaries have 

provider choice, and we see that the possibility that these kinds of 

bundles could raise barriers rather than break down barriers to access care. I also, for example, have five-star facilities, but I am not 

allowed to join certain networks in managed care right now because they don’t necessarily need the access, and there are facilities 

that are perhaps one-star facilities who are in the network. So the 

notion that the quality facilities will rise to the top has so far not 

been borne out. 

So we are not able to possibly join some of the these networks 

and offer the members choice, and I think any qualified excellent 

quality provider should be able to have access. We want additional 

flexibility in rendering care, not with a relaxation of regulations 

but being less prescriptive with how many minutes of therapy we 

give, with the venue of the therapy, so that we are measured on 

quality and outcomes. 

AHCA has worked collaboratively with CMS and our partners on 

the Hill to make monumental strides in terms of improving quality 

over the last several years, both in terms of rehospitalization rates, 

in terms of reduction of antipsychotic medications, et cetera. 

Finally, I just want to say that in any bundled system, we need 

a virtual bundle, not an actual bundle. A virtual bundle is something where the providers, even if they are aligned in a cohesive 

spectrum of care, can bill Medicare directly as opposed to leaving 

it to one provider to hold the dollars and have the others go to that 

provider to get paid. It is not necessarily a reliable payment system 

and it is not necessarily something that can be held accountable in 

the very, very thin margins and the cash flow stresses in which we 

operate. So with that, I will—— 

Mr. PITTS. The chair thanks the gentleman. 

[The statement of Mr. Russ follows:] 

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Mr. PITTS. I thank all the witnesses for your testimony. I will 

begin the questioning and recognize myself 5 minutes for that purpose. 

Dr. Morley, you state in your testimony that there are geographic 

differences in the number of beneficiaries discharged post-acute 

care. Is this exclusively a provider distribution issue or is it a result of regional variation in standards of care? 

Ms. MORLEY. I think it is both. Provider distribution is most 

clear, particularly using the example of the LTCHs or areas of the 

country without any access to LTCH providers, and that care is 

primarily delivered in acute care hospitals and skilled nursing facilities. However, there are also geographic differences in just patterns of care, so it is both factors that are contributing to the variation. 

Mr. PITTS. You state in your written testimony that, ‘‘additional 

standardized patient assessment data are needed to test risk-based 

models on larger samples.’’ What type of additional data needs to 

be collected? 

Ms. MORLEY. So the work that we have been doing with ASPE 

over the last several years has been work based on the post-acute 

care payment reform demonstration data where care data were collected on about 200 providers across the country between 2008 and 

2010. That data has been very useful for developing the framework 

for a risk adjustor, but we have been unable to look at subpopulations of patient diagnoses and to get a broader national understanding of how these models might differ for patients across the 

country. 

Mr. PITTS. Dr. Hammerman, what can Congress do to ensure 

range of post-acute providers, as you state in your written testimony? 

Dr. HAMMERMAN. I am sorry, could you repeat that question? 

Mr. PITTS. Yes, what can Congress do to ensure a range of postacute care providers, as you state in your written testimony? 

Dr. HAMMERMAN. So I believe that in a sense, being that the information is being provided via the IMPACT tool, i.e., functional 

assessments that will be looked at, in addition to the bundling 

projects that are under way, there will be data to be able to differentiate patients one from another, from the higher acuity patients that we currently manage in the long-term acute care hospital setting, as well as inpatient rehabilitation setting, as well as 

the lower acuity patients that goes to a skilled setting or cared for 

in a home environment. 

Mr. PITTS. Dr. Landers, in what ways would condition-related 

groups, or CRGs, align incentives for improved outcomes and reduce cost? 

Dr. LANDERS. The CRG model would create an incentive for the 

coordinators to look at care across the different venues of care that 

patients might be in, so that we can focus on having individuals 

in the most appropriate setting but also the most cost-effective setting, and that should both address quality and cost. 

Mr. PITTS. Mr. Russ, in your opinion, do you believe CMS’ quality 

improvement star rating system for PAC providers has improved 

the quality of care in the PAC setting? 

89 

Mr. RUSS. Well, I wouldn’t say that in and of itself it has improved the quality of care. I think it has made the spectrum of care 

providers more mindful of certain metrics to adhere to which we 

agree help measure quality. We think some of those metrics are 

flawed and not properly risk adjusted, but on the other hand, we 

are championing quality and working collaboratively with CMS on 

many of the components of the five-star system and particularly 

with the component of five-star that deals specifically with the 

quality measures. 

So we believe that, even though the five-star system is not perfect and we probably could come up with a better system, we are 

not opposed to a system that ranks and measures quality. Indeed, 

we are championing such a system, and we think such a system 

also should be an integral part of any kind of post-acute care bundling system that—the BACPAC bill, although it has some positive 

features such as the elimination of a 3-day hospital stay, is a bit 

short on ensuring quality and accountability across the spectrum, 

and I think pays more lip service to the notion of care coordination, 

and it seems to be more focused on payment coordination. 

Mr. PITTS. Quickly. What is the difference between your organization’s quality initiative and CMS’ quality improvement star rating system? 

Mr. RUSS. Well, our quality initiative is basically focused in five 

main areas, which CMS is mindful of, we have been working collaboratively with. They have adopted several of our quality initiative metrics or variations thereof to include in the five-star system, 

but we are comprised mainly so far, and we are going into the second generation of that system, so far we are focused on rehospitalization, on the reduction of off-label use of antipsychotic medication, on ensuring staff stability for the sake of continuity of care 

for the frail and elderly, and also focused on customer satisfaction. 

Mr. PITTS. Thank you. My time is concluded. The chair recognizes the ranking member Mr. Green, 5 minutes for questions. 

Mr. GREEN. Thank you, Mr. Chairman. 

Dr. Morley, from Dr. Miller in our first panel, we heard 

MedPAC’s concerns with potential stinting of care under the bundle payment design. The BACPAC Act requires the secretary to ensure that the cost of the bundles do not exceed 96 percent of the 

PAC expenditures that would have been made. The bill also specifies that PAC providers would be paid an amount that is not less 

than the amount which they would otherwise be paid. In other 

words, the bundles have to reduce cost without cutting provider 

payments. 

It seems to me that savings can only be generated by reducing 

prices in volume. The legislation, however, does not allow for price 

reductions; therefore, savings that come from volume reduction are 

less care. My first question. Could you discuss the dangers of bundles incentivizing stinting of the care or what we might do with it 

or do about it? 

Ms. MORLEY. Yes. I think one of the most important considerations here is the risk for stinting and cost shifting. This is always 

a concern when setting a prospective payment. So to the extent 

possible, we want to protect against stinting and cost shifting with 

strong quality measures. In combination with a payment incentive 

90 

under a bundled payment, quality measures can incentivize providers to deliver the most appropriate care and to achieve high 

quality beneficiary outcomes. 

Mr. GREEN. Can you speak about the potential effects of reducing 

the volume of services that beneficiaries receive? 

Ms. MORLEY. I think, again, back to the stinting and cost shifting. Without strong quality measures, there is an incentive to deliver fewer services in order to maximize the savings over the bundle for the entity holding the bundle, but I do think that with the 

quality measures in place, there can be—these incentives can be 

changed to protect beneficiaries. 

Mr. GREEN. OK. You also mention that—your testimony, a potential that services may be required outside the 90-day window established by the BACPAC. Does the BACPAC require PAC coordinators to pay for their services needed after the 90-day period? Since 

PAC coordinators are on the hook financially for only those services 

within that 90-day window, is it possible we may delay certain 

services until that window has been ended? 

Ms. MORLEY. To my knowledge, it seems that the PAC coordinators would not be responsible for services after the 90-day period, 

but it is possible that there would be an incentive to delay services 

to that post 90-day window unless those quality measures were in 

place to incent providers otherwise. We know from earlier research 

that the majority of service used is generally complete by a 90-day 

period, but there is some service use that does continue after 90 

days for—especially for medically complex patients, so if episodes 

end and services continue, information may be needed to set payments for those remaining services. 

Mr. GREEN. OK. The other concern about this is the financial incentive to stand on care and incent the least expensive setting. For 

example, under the BACPAC, the PAC coordinators would be able 

to keep mostof any savings they achieve. In other words, if a certain episode bundle is $1,000, the coordinator may spend only 600 

on the beneficiary, so there is a $400 difference. Does this not 

make this profit contingent on meeting certain minimum quality 

thresholds? 

Ms. MORLEY. I think that the strong quality measures need to 

be put in place to reduce stay incentive for cost shifting, stinting 

and potentially adverse beneficiary outcomes. Some potential quality measures that could be considered would be related to functional outcomes, cognitive status outcomes, or other items related 

to stint integrity as examples. 

Mr. GREEN. I guess we need to have those quality controls there 

because a coordinator could profit from bundling those patients to 

the least expensive setting as opposed to more clinically appropriate, so there has to be some guidelines there. 

So Mr. Chairman, I yield back my time. 

Mr. PITTS. The chair thanks the gentleman. Now recognize the 

vice chair of the subcommittee, Mr. Guthrie, 5 minutes for questions. 

Mr. GUTHRIE. Thank you, Mr. Chairman. Thank you all for being 

here. Sorry we were disrupted in the middle, but we had to go vote. 

91 

Dr. Morley, I want to ask you, do you think it is possible to establish episode-based programs while still including long-term care 

hospitals in the equation? 

Ms. MORLEY. I do, but I think, as I state in my testimony, I think 

it is going to take a lot of research and understanding of patterns 

of care, so that there is an understanding that these services are 

not uniformly available across the country. There will need to be 

specific geographic market adjustments so that beneficiaries will 

have access to use the services that they need, but I think it is possible to, you know, to find a way to include all settings. 

Mr. GUTHRIE. Thank you. And also for you, Dr. Morley. What 

ideas do you have for reforming this space outside of bundled payments? Is that the only option or are there others? 

Ms. MORLEY. I think another option that has been discussed and 

discussed this morning, as you know, move to site neutral payments. That is a way to move beneficiaries to move providers to a 

space where they are thinking about what care is needed for this 

beneficiary, regardless of setting, and I think setting neutral payments is separate from bundling but is another approach. 

Mr. GUTHRIE. Thank you. And Dr. Hammerman, do you believe 

that bundled paymentsand other types of reforms with the same 

philosophy have the potential to reduce necessary care, and if so, 

what steps would you recommend policymakers to mitigate these 

concerns? 

Dr. HAMMERMAN. Thank you. I think that, in general, the way 

that the long-term acute care hospital environment evaluates what 

is available from a bundling perspective, we need to strongly consider that the manifestation from the ICU patient population will 

continue to grow. The chronically, critically ill patient population 

will continue to grow, so any bundled strategy that takes effect will 

have to keep in mind that this patient population will be significant in both the near and long term. 

Recommendations are certainly in the realm of looking at these 

functional assessment tools and making certain that we keep in 

mind with this catastrophically ill patient population that the first 

venue is extraordinarily important to move forward because, as we 

know from the critical literature and as a practicing pulmonary 

critical care physician, that the return to an ICU from a post-acute 

setting can increase the mortality five- to tenfold, not just 5 to 10 

percent. So I think any bundling strategy that we would look at in 

the future has to keep that in mind from a very strong clinical perspective. 

In our opinion, the clinician at the bedside working with the 

interdisciplinary team has ultimately the largest priority in terms 

of making certain that we put patients in the right venue at the 

right time for the right reason. 

Mr. GUTHRIE. OK. Well, thank you both for your answers, and 

thank the panel for their testimony, and I yield back my time. 

Mr. PITTS. The chair thanks the gentleman. Now recognize the 

gentlelady from California, Mrs. Capps, 5 minutes for questions. 

Mrs. CAPPS. Thank you very much. And thank you, Mr. Chairman, for holding this hearing, all of the witnesses for your testimony. 

92 

I am pleased that we are here today to discuss post-acute care. 

I know how important this care is for patients who need continued 

medical attention. From long-term hospitals to home health providers, the various post-acute care providers all, each discipline offers essential healthcare services. I think we all agree that the way 

that post-acute care is delivered and paid for needs improvement. 

There are many elements that go into making a high quality 

cost-effective system, and as with any change to Medicare, we must 

carefully consider the impact a policy change will have on the quality of care and access to care for patients. We first must need to 

gain a better understanding about how to measure quality of care 

across the different post-acute care settings. 

Dr. Hammerman, in your testimony, you point out that the ACA 

put in place many important stepping stones for PAC, post-acute 

care reform. Currently, Medicare is testing and advancing a number of payment system reforms for post-acute care, including bundled payments and value-based purchasing. 

So my first question to you, Dr. Hammerman, is to ask you to 

describe some of the bundling demonstrations that have been created under the ACA and what we are learning from them so far. 

That is just the first of a few questions I have. 

Dr. HAMMERMAN. Certainly. I think I can speak in a very limited 

fashion in terms of from a long-term acute care hospital perspective, not overall in terms of a grander scheme of the BPCI projects. 

From that perspective, we have limited participation at this point 

from an LTACH perspective but more of a larger perspective 

from—— 

Mrs. CAPPS. Excuse me, LTACH? Long-term care facility. 

Dr. HAMMERMAN. I am sorry. Long-term acute care hospital 

standpoint. 

Mrs. CAPPS. Oh, got you. 

Dr. HAMMERMAN. So we have some experience in that realm, and 

I am happy to get further data for you offline as well. 

Mrs. CAPPS. Awesome. As a nurse, I am always concerned about 

how policies that reform payments will affect the quality of care to 

patients, and demonstrations from the Affordable Care Act are 

going to be crucial to providing some of the information we need 

to measure quality across PAC providers, but more work is needed, 

and I look forward to any information you can supply. 

My second question has to do with data from the IMPACT Act. 

While I share the concern of my colleagues that we must address 

the current challenges with post-acute care payments, it is important to look at the facts and examine the strategy you have already 

made. When the IMPACT Act was passed in the last Congress with 

strong bipartisan support, we ensured that post-acute care data 

could be standardized. 

This standardization allows for the comparison of patient assessment data across the various types of providers. Dr. Hammerman, 

in your testimony, you attested to the ability of this bill to help develop an informed and evidence-based post-acute care bundling system. 

Do we have all the data yet that the IMPACT Act might provide? 

If not, what kind of information might we learn about measuring 

quality of care in PACs? And if this is something that you would 

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rather refer to one of your colleagues there, that is fine with me, 

too. 

Dr. HAMMERMAN. Certainly. I can do that. From speaking from 

the long-term acute care hospital perspective, that data will be and 

is valuable to the next steps in terms of a bundling strategy, but 

I am happy to ask one of our colleagues, perhaps Dr. Morley, to 

comment on the IMPACT Act, or Dr. Landers. 

Ms. MORLEY. I can comment really to the IMPACT Act data. It 

is my understanding that there will be a phase in related to the 

data collection and that some of the first sets of data for SNF, IRF, 

and LTCH will be available in 2018 and home health in 2019. I 

think that one year of data would be ideal in order to be able to 

analyze and support the development of a payment system. 

Mrs. CAPPS. Did you want to add one—— 

Dr. LANDERS. I would just like to disagree with the notion that 

we need more time and a lot more data to begin improving postacute care. I think that there are a lot of people that are struggling 

right now with uncoordinated care and there are unnecessary costs, 

and also I want to point out that the Affordable Care Act and also 

the recent SGR fix, which incentivizes physicians to enter into alternative payment models, has greatly accelerated the adoption of 

what are called accountable care organizations or Medicare—— 

Mrs. CAPPS. Right. 

Dr. LANDERS [continuing]. Savings programs. Across the country 

right now, as we speak, we are seeing consolidation of health systems, we are seeing people aligned along the strategy of these accountable care organizations, and within them, they are making 

some pretty aggressive changes to how post-acute care is delivered 

within those systems. And so some of the same things that people 

have raised concerns is would there be stinting I think it was 

called, and would there be inappropriate shifting, that is all happening without the thoughtful structure of something like the clinical related group that has been outlined in this law. 

So I think that a lot of the things that we are concerned about 

happening if we move too fast are actually happening in the context of the recent reforms, and this would actually add more protections. 

Mrs. CAPPS. And we need data about them, it seems. I have one 

more question. I don’t know if there are other people waiting to 

speak. 

Mr. PITTS. We have one, but go ahead. 

Mrs. CAPPS. OK, if you don’t mind, extend my time a little bit. 

But I think we are at a point where, then you are saying, if I may 

extrapolate from what you said, that we have enough data already, 

that we can begin organizing and making some changes based on 

that, not to denigrate from the fact that we probably need more 

data. 

But Mr. Russ, I had a question for you, because my biggest concern is that without the proper information, we risk setting up a 

new payment system that incentivize providers to cut corners on 

care. I think it is clear from today that more information is needed 

as we look at reforming post care, even though, as you say, we 

have a lot of data about things that are already working and could 

be. 

94 

Mr. RUSS. I would simply say that I agree with that premise. I 

think the initiative that is being taken is to be applauded on many 

fronts as far as trying to move the modeling forward to create 

economies of scale and to create efficiencies of care delivery. But 

I do think that we don’t have enough data to go whole-heartedly 

into a particular system yet where we don’t know what the unintended consequences may be. 

Mrs. CAPPS. Right. 

Mr. RUSS. There are a lot of risks associated with it and we— 

at this vital time, this pivotal moment where we are moving away 

from fee for service and there is a consensus throughout post-acute 

care and through all the stakeholders and policymakers that we 

need to move to a better, more effective model, that we don’t 

plunge into something that is not yet well tested and that does not 

have unintended consequences creating barriers to access of care 

and to providers participation. 

Mrs. CAPPS. Thank you. Thank you for allowing me to go further. 

Mr. PITTS. Sure. Thanks the gentlelady. 

And now, without objection, the chair recognizes the prime sponsor of the BACPAC legislation, Mr. McKinley, 5 minutes for questions. 

Ms. MCKINLEY. Thank you, Mr. Chairman. And thank you to the 

panel. 

It was interesting how the first panel we had, they primarily 

were interested in cost. I saw a lot of questions had to do with cost, 

and the second panel you are more interested in—appropriately in 

quality of care and how that is going to be but—— 

So, let me try to address some of the issues I heard in the first 

panel before we went to vote is about the cost. I just want to remind everyone that I know it differs from the quality, but they 

need to be reminded again. This is a paid-for program with $20 to 

$25 billion in savings to protect our Medicare system. We also 

know that there have been at least three test cases of using this, 

both in Fresno, California and the Midwest and New England that 

actually have tried this model. And in all cases, the savings have 

been anywhere from 10 to 21 percent savings. So this thing does 

work on the cost side of it. 

And, Dr. Hammerman, you raise the issue of readmission. And 

having served on a hospital board for 28 years, I am very sensitive 

to that. And under this particular legislation, the cost coordinator 

is the one that is going to be responsible for that. So let’s go back 

to what that—the definition for those. I am sure everyone has read 

the bill. But under the provision, it is for the patient with the guidance of their physician, the guidance of their physician, to select 

their preferred provider, this coordinator. And then under the definition of the coordinator, it could be a hospital. 

So when we talk about cost cutting here, we talk about cutting 

quality, you are challenging hospitals that they are not doing quality care because under the very bill, it says they can be the coordinator. It could be the PAC coordinator, insurer, or third-party administrator, or a combination of hospital and PAC. So there is a 

whole series all of which come down to the secretary will make the 

determination of how their qualifications are set so they could be 

selected to be able to provide the services. The bottom line is, we 

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are trying to find ways to help people find through a coordinator 

to get the best care for them so that they don’t get readmitted to 

the hospital. 

So, Dr. Landers, let’s go back to your—it is essential, as we 

know, that any reform we undertake results in the improvement 

over the status quo of our rural communities. I come from a rural 

America, Wheeling, West Virginia. And in many areas all across 

this country, it is rural. 

So we are concerned, do you anticipate that rural patients will 

benefit from care coordination that is provided under this model; 

and that the coordinators, these ones that we have described, will 

have full rural coverage? 

Dr. LANDERS. I thank you for the question. 

I think that, in order to be competitive, the coordinators are 

going to have to have an adequate network and they are going to 

have to make sure that they have providers available for the provision of services to patients in rural communities. I also would add 

that because you have preserved the rate and benefit model within 

the bundles of the current system, things like this effort to improve 

the rural payment like in home health services in the recent law 

that those have been preserved, the additional 3 percent to account 

for their cost, I think that there are safeguards in place to protect 

rural patients, yes. 

Ms. MCKINLEY. One of the things that we have talked often 

about, as the chairman has pointed out, I don’t serve on this committee as—but I am keenly interested in a lot of these issues primarily because of the waste, fraud, and abuse that we hear often 

used here in Washington about Medicare. 

So we look at this thing. And do you think this BACPAC legislation will help weed out some of the bad actors that have perhaps 

been abusing this system by using a coordinator? 

Dr. LANDERS. Yes. I just can’t imagine the coordinator model, 

where the incentives are aligned for them to shepherd cost effective 

and high quality care, that they would engage fraudulent providers. I think this could be one of the biggest fraud prevention 

measures ever undertaken. 

Ms. MCKINLEY. Thank you. I wanted that to come out. 

And then, also, I just spoke on the floor before we came out with 

some of the other people that were in the committee earlier today, 

and we were talking about some of these issues. And one of the 

questions that was raised also in the first panel was, is this going 

to be a cost outside the system, and it is not. And I was explaining 

that. They hadn’t had a chance to review the bill yet, and that was 

that this is built into the cost. So that we want to reinforce, this 

is not our projection, but this is from the CBO that says that, 

under this legislation, it scores between $10—or $20 and $25 billion and for—and it was added that we could very well be addressing some of the waste, fraud, and abuse in the system by virtue 

of this cleaning out the bad actors. 

So I appreciate your panel and the questions raised. I think 

there have been some very interesting points. It is a framework. It 

is going to keep moving. I hope that some of the issues that you 

have raised can be amended and corrected and added into this legVerDate Nov 24 2008 14:49 Sep 11, 2015 Jkt 037690 PO 00000 Frm 00101 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-31 CHRIS
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islation. But we have to move forward. I don’t think we want to be 

waiting for another 2 or 3 years before we move on this. 

So I thank you, Mr. Chairman, for having this hearing and I 

hope that we can proceed with this legislation. Thank you. 

Mr. PITTS. The chair thanks the gentleman. 

Now recognizes the gentleman from California, Mr. Cardenas, for 

5 minutes for questions. 

Mr. CARDENAS. Thank you very much, Mr. Chairman. 

Mr. Russ, you are the chair of the American Healthcare Association—— 

Mr. RUSS. Yes. 

Mr. CARDENAS [continuing]. Otherwise known as AHCA. Your organization has developed a new payment concept for skilled nursing facilities to create your own bundle. Your payment proposal 

promotes patient-centered care and high quality facilities while 

saving the government money. 

Mr. RUSS. Yes. If I could elaborate on that, even though that is 

not the focus of today’s hearing, but I think it is part and parcel 

of the broader discussion about reform. 

We have come up—and we are in the process of finalizing with 

the help of the Moran Company—an episodic payment system for 

our sector. That would take us away from the current fee-for-service prospective payment model. It would make our members assume greater risk for the particular care that they are given, but 

they would be getting what is essentially a flat payment to cover 

all of the services rendered under our roof in that post-acute care 

space in exchange for delivering quality outcomes. There would be 

penalties presumably associated with failure to deliver quality outcomes, and it would protect against what might be deemed the 

overdelivery of services now under the current fee-for-service system and yet prevent us from underdelivery of service which some 

people might argue could take place when a third party convenor 

or other entity is managing an across-the-spectrum bundle. 

So we think that this is a great step forward for our sector. We 

don’t necessarily think it is the final chapter for our sector, but we 

think it is the best possible iteration of change that we could muster in a path toward possible broader spectrum post-acute care 

bundling. It could be a step in that direction, but we really believe 

it will hold us more accountable. And essential to the whole system 

is the measurement, empirical measurement, of quality. 

Mr. CARDENAS. Thank you, Mr. Russ. You testified that your organization has six guiding principles that you use to evaluate PAC 

bundled payment models and that the BACPAC Act either doesn’t 

meet those principles or is unclear. One of those principles is that 

the policy must preserve a patient’s freedom of choice of provider. 

Can you speak a bit more about your specific concerns with the 

BACPAC Act and preserving freedom of provider choice? 

Mr. RUSS. Yes. I think in the larger sense, I mean, when you 

have got networks that are being established, inevitably there are 

going to be certain providers, for whatever reason, whether they 

are judged on quality, whether they are judged on economic expediency, whether they are judged on their ability to provide lower cost 

to the care coordinator, we don’t know what those incentives are 

going to be, but they are inherently exclusionary. They don’t allow 

97 

all willing, good quality, highly rated by CMS providers to participate. 

And while we may pay lip service to the notion that ultimately 

the patient will decide who the provider will be whom they are 

going to access services from, ultimately, the care coordinator is 

going to make that decision because they are coordinating the bundle. And so I don’t necessarily see how this will enhance patient 

choice. I think it would probably reduce patient choice, and I think 

it would also reduce the ability of any willing good provider to participate in that particular bundle. 

Mr. CARDENAS. So, is AHCA concerned that there is no mechanism for a beneficiary to seek PAC outside of their coordinator’s 

network without switching to a new coordinator? 

Mr. RUSS. Well, I think there are so many ambiguities in the bill 

as to how this would roll out. I think our overarching conclusion 

is that this doesn’t seem to be practicable or implementable. And 

I think when you consider also the various demographic differences 

across the country—we have heard a lot about rural settings. There 

are urban settings. There are settings—each marketplace is driven 

differently by who happens to be the powerhouse in that marketplace, whether it is a hospital network, whether it is a home health 

agency, or whether it is a large string of skilled nursing facilities. 

You have got a very, very uneven playing field and a kind of nebulously conceived bundle payment package to overlay this is going 

to be very difficult, if not impossible to implement effectively and 

consistently across the country. 

Mr. CARDENAS. Thank you, Mr. Russ. 

Yield back my time. Thank you, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman. That concludes the 

questions from members who are present. We will have follow-up 

questions. I know other members who couldn’t make it back will 

have some questions. We will submit those to you in writing. We 

ask that you please respond promptly. 

And I remind members that they have 10 business days to submit questions for the record. Members should submit those questions by the close of business on Thursday, April 30th. 

Very good hearing. Thank you very much for the information. 

Very important. Without objection, subcommittee is adjourned. 

[Whereupon, at 1:07 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

PREPARED STATEMENT OF HON. FRED UPTON

Modernizing and strengthening Medicare to improve care for seniors and help 

make it more sustainable over the long run remains a top priority for this committee. Today the Health Subcommittee will examine Medicare’s payment policies 

for seniors utilizing post-acute care. Post-acute care—care that some of our most 

vulnerable seniors rely on, usually after discharge from a hospital stay—represents 

a fast-growing part of the Medicare benefit, having roughly doubled in cost over the 

last decade. With 10,000 Baby Boomers entering Medicare each day, it is essential 

that we understand how Medicare’s current post-acute policies impact the quality 

of care seniors in Michigan and across the country receive. 

Post-acute care providers currently face significant disparities in the range of reimbursements they receive from the Medicare program. This is, in part, a legacy of 

past legislative efforts designed to target resources to specialized facilities which 

were intended to care for more complex patients in an intensive manner. However, 

in recent years, continued advancements in medical technology and clinical best 

98 

practices have proven that there may be opportunities to make post-acute reimbursements more efficient, while better measuring and rewarding quality, 

incentivizing coordinated care, and improving seniors’ care overall. 

Improving post-acute care services for seniors is an area that is ripe for bipartisan 

agreements. From the President’s FY2016 Budget, to Republican proposals, to right 

here in our committee, there are a range of ideas on how to increase quality, improve seniors’ care, and reduce costs in a targeted manner. I would like to thank 

Rep. McKinley from this committee in particular for his work on H.R. 1458, the 

‘‘Bundling and Coordinating Post-Acute Care Act of 2015’’ (BACPAC). This bipartisan bill, cosponsored by Reps. Tom Price, Jerry McNerney, and Anna Eshoo outlines a way to provide bundled payments for post-acute care services under Medicare, while protecting seniors’ choices and helping coordinate care. 

I look forward to continuing to work with my colleagues and the experts testifying 

today as we find bipartisan opportunities to improve health care for seniors. I especially want to thank Mark Miller, the director of MedPAC, and his staff for all their 

hard work. We continually turn to MedPAC for analysis and expertise, and we appreciate the resource he and his team are to the committee. I thank all of the witnesses for their important testimony. 

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