Plus: P4P gets renewed emphasis from influential senators.

With a new presidential administration and congressional majority itching to make sweeping healthcare changes, things soon could look very different for post-acute care providers -- with some seriously negative consequences for them.

And a new report from the Medicare Trustees predicting the Medicare Part A trust fund’s insolvency in just eight years is adding fuel to the legislative fire.

Increased emphasis on fraud and abuse-fighting activities is turning into a go-to solution for law- and policymakers looking for ways to trim the Medicare budget. In new 2010 budget proposal details released this month, President Obama proposes $485 million in savings due to “a multi-year increase in program integrity activities.”

“The adjustment … will enable the Centers for Medicare & Medicaid Services to more rapidly respond to emerging program integrity vulnerabilities through an increased capacity to identify excessive payments and new processes for identifying and correcting problems,” budget documents say.

And the agency expects good ROI. “We estimate that for every $1 we spend to stop fraud in the system, we save $1.55,” new Health and Human Services Secretary Kathleen Sebelius said in a release. New fraud-fighting efforts would prioritize Medicare Advantage and prescription drug plans, but fee-for-service providers would also be likely to see increased scrutiny, experts predict.

Senate Finance Committee Chair Max Baucus (D-Mont.) and Ranking Member Charles Grassley (R-Iowa) also like the idea of increasing fraud-fighting efforts. The influential senators have re-leased their own healthcare reform proposal that includes ideas such as beefing up pre-enrollment screening of providers using application fees, requiring surety bonds of all providers, imposing moratoria on new providers, improving databases used for PI activities, and increasing Medicare compliance requirements and penalties.

Meanwhile, the HHS Office of Inspector General is emphasizing the fraud-fighting tools already at its disposal. According to May 6 testimony by Inspector General Daniel Levinson before the Senate Special Committee on Aging, the OIG is continuing to step up its enforcement actions.

Of the $2 trillion that the U.S. spends on health care each year, at least 3 percent (or over $60 billion annually) is lost to fraud, Levinson estimated. The OIG launched 1,750 new health care fraud investigations during financial year 2008, he said.

The OIG also issued a warning reminding entities receiving stimulus bill funds that whistleblowers are protected from reprisals for reporting violations, abuse, etc.

SNFs, HHAs, LTCHs, IRFs Could Depend on the Hospital for Payment

Another idea popular with the Senate Finance Committee leadership and President Obama is bundling of post-acute and hospital payments to achieve improvement in hospital readmission rates. Post-acute providers include skilled nursing facilities, home health agencies, inpatient rehab facilities, and long-term care hospitals.

For example, under Baucus and Grassley’s proposal, post-acute services begun within 30 days of a hospital stay would be subject to bundling with the hospital receiving the payment. “Hospitals or other eligible entities would receive the bundled payment for each patient served, regardless of whether the patient receives post-acute care services,” the proposal explains. “No additional payments would be made to the hospital … for readmissions during this timeframe, and Medicare would no longer make separate payments to post-acute providers for care initiated within 30 days post-discharge.”

The senators would phase in such bundling from 2015 to 2019.

In his budget plan, Obama calls for bundling payments to hospitals for acute and post-acute care even sooner, in 2013, points out the National Association for Home Care & Hospice. The administration expects the change to yield $820 million through 2014.

Post acute bundling “could be a windfall for hospitals that manipulate the system,” NAHC’s Val Halamandaris told the New York Times. “If hospitals are simply given a sum of money to pay for both acute and post acute care, some of them will yield to the temptation of keeping as much of the money as possible rather than providing the full measure of care to maintain the patient in optimum health and prevent re-hospitalization.”

Post-acute provider executives are very opposed to the idea of depending on hospitals for their payments, they say.

Regular Payments Suffer Too

The proposed payment rules recently released for SNFs and LTCHs (see the last two issues of Medicine & Health) have suggested further cuts to these facilities' payments as well. LTCHs are slated to lose 1.9 percent of their regular inflation update. And the proposed SNF PPS rule seeks to implement a major case-mix recalibration to the RUG-III system (which determines how SNFs get paid) that totals to about a 1.2 percent drop in payment. Obama’s budget retains its proposed cuts for home care providers as well. “Sixty-five percent of home health agencies in Wisconsin would be running deficits” if the administration’s recommendations are adopted, Mary Haynor of Horizon Home Care and Hospice in Brown Deer, Wis., tells the Associated Press. “That’s not sustainable for our state.”

But HHAs may have a hard time convincing lawmakers of that fact when the industry is showing double-digit profit margins on average, experts worry. If the congressional budget resolution is any indicator, however, agencies may be in luck -- the budget blueprint passed last month included no home care cuts.

Baucus and Grassley’s proposal also suggests implementing pay for performance -- now termed “value-based purchasing” -- for HHAs and SNFs, implementing infrastructure and payments for chronic care coordination. Meanwhile, SNFs and SLTCHs would begin quality reporting programs.