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The Medicare Payment Advisory Commission (MedPAC), the nonpartisan government agency that advises Congress on Medicare policy, indicated at its November 7, 2014 public meeting that, at its next public meeting in December, it would recommend (1) phasing-in site-neutral payments for inpatient rehabilitation facilities (IRFs) and skilled nursing facilities (SNFs) for 17 conditions, which it has not publicly identified and (2) loosening regulatory requirements for IRFs so that they might continue to provide care to Medicare beneficiaries after their Medicare reimbursement rates are reduced.[1]  MedPAC will recommend deleting IRF requirements that physicians see patients at least three times per week and that IRFs provide intensive therapy to patients each day.  The Center for Medicare Advocacy says to MedPAC: Don't do it. 

The fundamental premise of MedPAC's recommendations is flawed.  IRFs and SNFs do not provide the same level of care to their patients and, consequently, their patients do not have the same health outcomes, contrary to MedPAC's presumption that patient outcomes in both settings are similar enough to justify site-neutral payments.  Multiple studies find that patients who are able to tolerate the higher amount of therapy provided by IRFs have better outcomes than residents who receive their post-acute care in SNFs.  Watering down IRF requirements so that they resemble SNF requirements will jeopardize, if not eliminate, the higher IRF level of care that some Medicare patients need and can benefit from.  Moreover, the HHS Inspector General's report on adverse events in SNFs,[2] described below, found that many Medicare beneficiaries were harmed when they received post-acute care in a SNF for, on average, 15.5 days.  This certainly does not support MedPAC's recommendation to make IRFs look like SNFs.  The costs, in both financial and human terms, are too high. 

MedPAC projects that site-neutral payments will result in savings to the Medicare program of almost $500 million, 7% of IRF spending.[3]  The Center questions whether MedPAC has taken into account the additional costs to the Medicare and Medicaid programs that could result from site-neutral payments.  Higher rates of rehospitalization as well as physician services, durable medical equipment, and other Medicare-covered health care costs, in addition to Medicaid costs for dually-eligible beneficiaries who remain in SNFs under Medicaid after their Medicare coverage ends, could all lead to higher total health care spending for patients who are denied medically necessary and appropriate IRF coverage.  The projected savings from site-neutral payments could evaporate.

IRFs and SNFs Provide Different Care

IRFs, a category of acute care hospitals, are currently required to have significantly higher staffing levels than SNFs and to provide more direct care to their patients each day.  The following chart reflects requirements for the two care settings, as identified by MedPAC in November 2014.[4] 




Physician oversight

Rehabilitation physicians must see patients at least three times per week

Physicians must see residents within 14 days of admission and then every 30 days

Registered nurse staffing

24 hours per day

Eight hours per day

Therapy services

Intensive; often described as at least three hours per day

No requirements; Medicare reimbursement rate depends on amount of therapy SNF says it provided

HHS Inspector General Found High Levels of Adverse Events in SNFs for Medicare Beneficiaries

A recent report by the HHS Office of Inspector General (OIG) underscores why patients should not be inappropriately shifted to SNFs for post-acute care.  Earlier this year, in the first analysis of adverse events in SNFs, OIG reported that nearly one in three Medicare beneficiaries who went to a SNF for 35 days or fewer in August 2011 (and who spent an average of 15.5 days in the SNF) experienced an adverse event or other harm, including falls, avoidable infections, pressure sores, improper medication dosing, hospitalizations, and death.[5] 

Physicians who conducted the reviews for OIG found that 59% of the adverse events and incidents of temporary harm were "clearly or likely preventable" and that "many events were the result of failure by SNF staff to monitor residents or staff delay in providing necessary medical care."[6]  Factors contributing to these poor outcomes for residents included "substandard treatment, inadequate resident monitoring, and failing to provide treatments."[7]

OIG reported that more than half of the residents who experienced harm were hospitalized, "with an estimated cost to Medicare of $208 million in August 2011."[8]  In addition, "[A]n estimated 1.5 percent of Medicare SNF residents [1,538 individuals] experienced events that contributed to their deaths"[9] in August 2011.  For most of these residents, death was "likely not an expected outcome."[10]

Studies Find Better Health Outcomes for IRF Patients than for SNF Residents

Many studies comparing health outcomes for patients in IRFs and SNFs find that patients have better outcomes when they receive post-acute care in IRFs. 

  • A longitudinal analysis looking retrospectively over a two-year period at 100,491 matched pairs of patients (i.e., patients with the same conditions) found that IRF patients had better clinical outcomes than patients treated in SNFs on five of six measures (average length of stay in post-acute care; additional days of life; ability to remain home without facility-based care; emergency room visits).  For the sixth measure, hospital readmissions, IRF patients also had fewer rehospitalizations than SNF residents for five of 13 conditions studied.[11]
  • A comparison of 102 matched IRF-SNF pairs of patients receiving rehabilitation for total knee replacement, total hip replacement, and hip fracture found "superior functional outcomes in a shorter length of stay" for IRF patients.[12]  While Medicare reimbursement for an IRF stay was higher than for a SNF stay, the researchers did not look at physician or pharmacy payments "or any of the additional services related to follow up care or readmission [to an acute care hospital]."[13]
  • An analysis of post-acute care for patients receiving hip fracture repair found that IRF patients had shorter lengths of stay and receive more total therapy minutes per day than patients in SNFs or home health.[14]  Sixteen percent of the SNF patients, but none of the IRF patients, were discharged to a nursing facility.[15]

MedPAC's Own Analysis Does Not Appear to Support Site-Neutral Payments

In its June 2014 report, MedPAC described its "overarching principle" for site-neutral payments: "Medicare should not pay substantially different prices for the same service or for treating similar patients."[16]  It continued, "Instead, prices should be based on the lower cost setting when the patients appear to be similar and, where evidence exists, quality and outcomes appear to be similar."[17]

Applying this principle to IRFs and SNFs, MedPAC found an overlap in the patients receiving care in the two settings.  It acknowledged that IRF stays are shorter than SNF stays and that IRF patients receive more intensive therapy services than SNF patients.  Nevertheless, it questioned "whether the [Medicare] program should pay for these differences when the patients admitted and the outcomes they achieve are similar."[18] 

MedPAC's analysis of patient outcomes is especially troubling.  MedPAC relied on the CMS-funded Post-Acute Care Payment Reform Demonstration (PAC-PRD), which, it says, dismissed prior studies reporting differences between IRFs and SNFs in patient quality and outcomes, finding that they predated both the prospective payment system for IRFs and "the enforcement of the 60 percent rule, which shifted the mix of patients treated in IRFs."[19]  MedPAC relied on the findings of PAC-PRD, which developed a uniform patient assessment tool (the Continuity Assessment Record and Evaluation, or CARE) and used the tool to evaluate post-acute care.[20]  The Center for Medicare Advocacy questions whether the PAC-PRD report leads to the conclusions that MedPAC draws from it. 

MedPAC looked at four patient outcomes evaluated in PAC-PRD – hospital readmission rates, change in function (mobility and self-care), mortality rates, and total Medicare spending during the 30 days after discharge – and described the results as "mixed."[21]  MedPAC reported "larger differences between the settings" when measures were "unadjusted" and "small to no differences between the settings" when the measures were "risk-adjusted"[22] for patient acuity.  Specifically, it found:

  • Differences in hospital readmission rates "were effectively eliminated with risk adjustment;"
  • "Risk-adjusted differences in improvement in self-care were larger for patients treated in IRFs," except for mobility;
  • "Observed mortality rates were higher for patients treated in SNFs;" 
  • Medicare spending was higher 30 days after discharge from IRFs.[23]

These results suggest better outcomes for patients receiving post-acute care in IRFs with respect to self-care (except mobility) and mortality rates and, for unadjusted findings, hospital readmissions.  In the view of the Center for Medicare Advocacy, MedPAC incorrectly describes these results as mixed.  The Center also questions whether the risk adjustments may have overadjusted the results, thus impeding an accurate finding that patient outcomes are more favorable in IRFs than in SNFs.  Moreover, the researchers who conducted PAC-PRD, the study relied on by MedPAC, described the usefulness of the uniform assessment tool as CMS begins to consider revising payment systems for post-acute care.[24]  They wrote, "Translating the findings presented in this project into actual payment models will require additional work."[25]


Although both IRFs and SNFs use similar multidisciplinary approaches and provide physical therapy, speech therapy, and occupational therapy to their patients, the intensity of the therapies and the medical oversight is the real difference in the two levels of care.  IRFs provide more therapy services and more medical and nursing oversight than SNFs.  As a consequence, IRF patients have better outcomes than patients in SNFs.  Reducing requirements for IRFs so that they look like SNFs will jeopardize the availability of an important intensive level of care that is needed by many Medicare beneficiaries at a critical time in their recovery

Finally, the Improving Medicare Post-Acute Care Transformation Act (IMPACT) of 2014, Public Law 113-185 (Oct. 6, 2014), requires implementation of a standardized post-acute data collection system, beginning in 2018.  Until we have the standardized data generated by that process, calling for implementation of site-neutral payments is premature.

December, 2014 – T. Edelman




[2] Office of Inspector General, Department of Health and Human Services, Adverse Events in Nursing Facilities: National Incidence Among Medicare Beneficiaries [hereafter OIG, Adverse Events], OEI-06-11-00370 (Feb. 2014),
[3] Id. Page 15.
[4] MedPAC includes these differences in its PowerPoint for Commission members, slide 3,
[5] OIG, Adverse Events, supra note 2, pages 17-20.  See Center for Medicare Advocacy, "OIG Report: Care in Skilled Nursing Facilities Harmed Nearly One-Third of Medicare Residents in August 2011" (Weekly Alert, Mar. 2014),
[6] Id. page 28.
[7] Id. page 24, 28.
[8] Id. page 25.



[9] Id. page 19.
[10] Id.
[11] Dobson DaVanzo & Associates, Assessment of Patient Outcomes of Rehabilitative Care Provided in Inpatient Rehabilitation Facilities (IRFs) and After Discharge (July 2014), Center for Medicare Advocacy, "Inpatient Rehabilitation Facilities and Skilled Nursing Facilities: Vive La Difference!" (Weekly Alert, ),
[12] Herbold JA, Bonistall K, Walsh MB, "Rehabilitatin following total knee replacement, total hip replacement, and hip fracture: a case-controlled comparison," J Geriatr Phys Ther, 2011 Oct-Dec;34(4); 155-60,,.2.aspx 
[13] Id.
[14] Mallinson T, Deutsch A, Bateman J, Tseng HY, Manheim L, Almagor O, Heinemann AW, "Comparison of discharge functional status after rehabilitation in skilled nursing, home health, and medical rehabilitation settings for patients after hip fracture repair," Arch Phys Med Rehabil, 2014 Feb; 95(2): 209-17,
[15] Id. page 211.
[16] MedPAC, Report to Congress: Medicare and the Health Care Delivery System (June 2014) [hereafter MedPAC June 2014 Report], page 100,  Chapter 6 is entitled "Site-neutral payments for select conditions treated in inpatient rehabilitation facilities and skilled nursing facilities."
[17] Id. page 100.
[18] Id. page 94.
[19]  Id. page 104.
[20] Id. page 104.  Gage, B., Post-Acute Care Payment Reform Demonstration Project: Report (March 2012),
[21] Id. page 110.
[22] Id. page 94.
[23] Id. page 110.
[24] Gage, B., Post-Acute Care Payment Reform Demonstration Project: Report (March 2012), Vol. 4, pages 251-252,
[25] Id. Vol. 4, page 252.



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