PPS's $1,500 cap: hope for the best…plan for the worst - interview with National Assn of Rehabilitation Agencies Pres Larry P. Fronheiser - prospective payment system - Interview

Nursing Homes,  April, 1998  by Linda Zinn

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Interview with Larry P. Fronheiser, PT, President, National Association of Rehabilitation Agencies

Not the least among the laundry list of changes providers of skilled nursing care face in coming months, directly affecting their post-acute care delivery of services and bottom line, is the $1,500 per year cap on payments for Medicare Part B services and supplies for a patient receiving rehabilitation therapy. Not surprisingly, a coalition of provider groups is preparing to press Congress for its repeal, with uncertain result as of press time (early March). Besides viewing the cap with alarm, Larry Fronheiser, PT, president of both the National Association of Rehabilitation Agencies (NARA) and of the private practice section of the American Physical Therapy Association (APTA), offered suggestions for coping with this restrictive - potentially over-restrictive? - measure, in an interview with Nursing Homes Associate Editor Linda Zinn.

Let's say that the law mandating the Medicare Part B cap for rehabilitative services is not repealed. What are some of the implications, in terms of delivery of service, that long-term care facilities should be bracing themselves for?

Fronheiser: Generally speaking, SNFs first need to assess exactly what impact prospective payments will have on their facility because the Prospective Payment System (PPS) primarily deals with Part A patients. If, for example, a large facility has a small Part A population, you could make a case that the prospective payment won't be of great concern. Or, for a SNF with a high-acuity population of residents who stay on Part A for most of their time in the facility, the Part B cap isn't too problematic - most of their patients will have received most of their therapy by the time they move from the PPS/Part A situation on to Part B. But if most of a facility's residents require Part B services, the cap becomes singularly important in terms of its effect on therapy delivery.

Aside from the implications of these various case-mix scenarios, what do you foresee the magnitude of the impact of the Part B cap to be for SNFs?

Fronheiser: The main thrust of the problem involves the number of episodes requiring therapy that any given Medicare patient is likely to experience in a year. I don't believe we have sufficient information to predict that. Furthermore, additional data are needed to determine what percentage of Medicare recipients will need therapy services costing in excess of the $1,500 cap.

What makes this hard to predict is patients with multiple episodes in a year. A facility could have a patient, for example, who undergoes total knee replacement in January, has an arthritic flare-up in April breaks a wrist in the summer and suffers a stroke in November. Each of these events might require at least one type of outpatient therapy - PT, OT or ST. Compiling data representative of such patients into a database for the purpose of making projections is extremely difficult. How can anyone predict how many injuries or illnesses even one patient might experience in a year, much less how many of these episodes will occur across the entire Medicare population?

The consensus among many therapy providers is that for a single episode, the cap won't be a problem, because the average cost per patient of therapy per episode is well below the cap. In the company I'm associated with, the average cost of a Medicare therapy episode is about $800; that being the case, the patient could conceivably even have a second episode within a year and not reach the cap. Residents of SNFs, however, by definition, usually have more than one problem, making predictions about the impact of the $1,500 limit difficult. The bottom line is that no one historically tracked the average number of incidents per patient over the years because no one foresaw that we would be facing this cap today.

How difficult will it be to determine whether Medicare beneficiaries have reached their Part B cap for the year, especially when they first arrive at a SNF?

Fronheiser: This is a significant problem. Consider this possibility: A hospital calls your facility to refer a patient and it's November. That patient needs OT and perhaps some speech therapy. Let's just say this patient isn't even a Medicare Part A beneficiary; he simply wants to come to your facility because he's heard you provide good therapy. What are the options for your social worker or admissions clerk? Will he or she have to ask, "Did you have any other therapy this year?" You're immediately in an adversarial relationship with the patients you're trying to serve, who have chosen your facility, because you're asking numerous questions about whether they had therapy, who paid for it, were they on Medicare Part A or B, were they in another nursing home or at an outpatient clinic, etc.

HCFA clearly admits that there is no easy way to find out this information. There's no Medicare database and no number to dial to find out someone's status in the $1,500 scheme of things at that point in time; so what some facilities will do is simply provide the treatment and submit the bill. If the patient is over the cap, the facility loses. Or some facilities might just decide not to treat patients whose part B status is unclear. That involves both ethical and business questions, and it will be up to each facility to determine its policy.