I am one of the brave souls who takes the time to read the report issued each spring by the Medicare Payment Advisory Commission (Medpac). The report shows the numbers of Medicare beneficiaries and claims are growing; healthcare organizations are increasingly losing money on Medicare; payment increases certainly will not keep pace with declining margins; and Medicare policies will continue to incentivize quality and push providers to assume more risk. But the report also reveals that some healthcare organizations—referred to as “relatively efficient”—are making money from Medicare with an average 2 percent margin. How do you become one of these organizations? And how do you target and counter Medicare trends that impact your business?

1. The Best Solution for Declining
Medicare Reimbursements

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Declining Medicare Reimbursements
Given the continued trends for declining
Medicare reimbursements, I am one of the
brave souls who takes the time to read the
report issued each spring by the Medicare
Payment Advisory Commission (Medpac).
MedPAC is a nonpartisan agency that
provides Congress with analysis about the
Medicare program.
Many of their reports are used to set policy
for the Medicare program. The push for
quality is strong and MedPAC is working
to provide the right incentives for quality.

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Declining Medicare Reimbursements
Though the reading can be a bit dry, the
information contained in the report is
important—particularly considering the fact
that the commission’s recommendations
are influential in shaping policy.
Medicare payment policies tend to set a
precedent for other payers.
I reviewed two documents published by
MedPAC:
June 2017 A Data Book, Health Care
Spending and the Medicare Program
June 2017 Report to Congress Medicare
and the Health Care Delivery System
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Declining Medicare Reimbursements
The Report to Congress covers 10 areas from stand-alone ED
to provider payment.
I am just focusing on a couple of the areas and showing a few
key findings from the data distributed.
Spending
Utilization trends
Readmission
Discharge disposition
Concentration of spending
Low-value care
Addressing Declining Medicare
Reimbursements
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Declining Medicare Reimbursements
Spending
The reports show the spending trends are not affordable long-term. We have
been able to lower the per beneficiary spend but we must sustain that trend.
Medicare per beneficiary spend has fallen to an annual increase rate of 1 percent for
the period 2010 to 2015.
Projections for 2016-2025 show a higher annual growth rate of 4 percent in the per
beneficiary spend.
During the same time-period the aging of the baby-boom generation will cause an
increase of enrollment of 3 percent annually. By 2030 there will be 81 million
beneficiaries in the Medicare program.
Overall Medicare spending will increase 6-7 percent each year and this is a higher
projection than the GDP (Gross Domestic Product). GDP is projected to increase 5
percent annually.
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Declining Medicare Reimbursements
Utilization trends
From 2006 to 2015 in the Medicare program,
outpatient visits per beneficiary increased 47
percent and inpatient admissions declined by
almost 20 percent.
During the same time, Medicare length of
stay decreased 7.7 percent. These facts will
impact the location of services for the
populations served.
The graphic on the next slide illustrates this
shift in services.

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Declining Medicare Reimbursements
Utilization trends
Source: MedPAC analysis of CMS claims

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Declining Medicare Reimbursements
Utilization trends
There have been a couple of shifts in the type of cases
admitted to the hospital between 2006 and 2015.
Circulatory system cases accounted for one-fifth of all inpatient
discharges in 2015, and this is a decline of 6 percentage points
from 2006.
Musculoskeletal system cases accounted for 14 percent of all
inpatient cases and this is an increase of 2 percentage points
from 2006.
Up 5 percentage points is infectious and parasitic disease
cases which accounted for 9 percent of all inpatient discharges.
The outpatient shift will continue, and we need to
plan for facilities and consumer preference.
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Declining Medicare Reimbursements
Readmission
In 2013, the Hospital Readmission Reduction
Program (HRRP) started calculating penalties for
hospitals that have above-average readmission
rates for selected conditions.
From 2010 to 2015 the potentially preventable
readmission rates declined from 12.9 percent to
10.5 percent for all conditions.

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Declining Medicare Reimbursements
Readmission
The three conditions covered under the HRRP
beginning in 2013 have experienced declines in
potentially preventable readmission rates:
AMI declined 3.6 percentage points
Heart failure declined 3.1 percentage points
Pneumonia declined 2.5 percentage points
CMS started a program that involves a negative
payment and hospitals have responded to the
penalty by working to lower readmissions.
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Declining Medicare Reimbursements
Discharge disposition
In 2015, about 46 percent of all Medicare fee-
for-service patients were discharged from an
acute care hospital to home, without any
organized post-acute care.
This represents a decrease 7 percentage points
from 2006. More Medicare patients are being
discharged to post-acute care services.
Twenty-one percent are discharge to skilled
nursing care and seventeen percent are going
home with organized home-health services.

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Declining Medicare Reimbursements
Discharge disposition
MedPAC is recommending implementation of
a unified payment system for post-acute care.
Medicare currently has seen differences for
similar patients based on the post-acute
venue chosen.
The supply and use of post-acute providers
varies considerably across the country.
MedPAC would like payments based on patient
characteristics rather than site of service.

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Declining Medicare Reimbursements
Discharge disposition
Bundle payments would help in this area and
place accountability with the organization that
assumes the risk.
Also CMS may revamp the payment system
for post-acute care by 2020.

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Declining Medicare Reimbursements
Concentration of spending
The costliest 25 percent of beneficiaries account
for 84 percent of the spend.
The costliest areas of spend include dual eligible
(Medicare, Medicaid recipients), beneficiaries
with multiple chronic conditions, users of inpatient
services and those in last year of life.
CMS needs to develop programs that target and
value care coordination.

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Declining Medicare Reimbursements
Low-value care
MedPac devoted several charts to display low-value
care. The definition of low-value care is the provision
of a service that has little or no clinical benefit.
They used a set of 31 measures developed by a
team of researchers. Then they applied dollars to the
list, and the spend for 2014 was $2.4 to $6.5 billion.
The list includes testing, imaging and screening.
Some high spend examples are stress testing for
stable coronary disease and imaging for nonspecific
low back pain.

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Declining Medicare Reimbursements
Low-value care
MedPac stated this is just a start to determining the cost of low-value care.
Providers should be evaluating the 31
measures in their institutions.
We may currently get revenue for the
services, but we need to shift to a value lens.

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Declining Medicare Reimbursements
Addressing Declining Medicare Reimbursements
I am hoping you can see from these facts that those
recommending new policies will continue to push
providers for quality and value.
More beneficiaries are entering the program and there
will be constant pressure to control the cost.
There is a willingness to pay for better outcomes.
Using data to derive insightful analytics through
platforms such as the Health Catalyst® Data
Operating System (DOS™), healthcare
organizations can approach these changes with
confidence that they can adapt and thrive in
a more value-based environment.

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For more information:
“This book is a fantastic piece of work”
– Robert Lindeman MD, FAAP, Chief Physician Quality Officer

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More about this topic
Link to original article for a more in-depth discussion.
The Best Solution for Declining Medicare Reimbursements
2015 Sustainable Growth Rate Repeal: The Future is Here
Bobbi Brown, VP of Financial Engagement
The Medicare Sustainable Growth Rate Repeal: Implications for Your Health System
Brian Ahier, President of Advanced Health Information Exchange Resources, LLC; Laura Dietzel

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Other Clinical Quality Improvement Resources
Click to read additional information at www.healthcatalyst.com
Bobbi Brown is the Vice President of Financial Engagement for Health Catalyst. Ms. Brown
started her healthcare career at Intermountain Healthcare supporting clinical integration efforts
before moving to Sutter Health and, later, Kaiser Permanente, where she served as Vice
President of Financial Planning and Performance. Ms. Brown holds an MBA from the
Thunderbird School of Global Management as well as a BA in Spanish and Education from
Misericordia University. She regularly writes and teaches on finance-related healthcare topics.
Bobbi Brown