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March 29, 2021

Journal of Health and Life Sciences Law

Legal Limits and Policy Merits of Routine Periodic Rebasing in Medicare PPS Methodologies

  • March 29, 2021
  • Susannah Gopalan , Feldesman Tucker Leifer Fidell LLP
  • Amanda Pervine , Feldesman Tucker Leifer Fidell LLP

Prospective payment systems (PPS), prevalent in Medicare, are designed to provide a fixed, per-unit payment based on providers’ historic costs in a base year. But while PPS methodologies are related to providers’ costs, they also are designed to foster cost-containment, by limiting annual rate increases to an inflationary measure and by permitting adjustments that are typically limited to clinical (e.g., patient acuity) and geographic (e.g., area wage index, “rural add-on”) considerations.

Since the implementation of the Medicare inpatient hospital PPS in 1983, commentators have debated the merits of periodic “rebases”—i.e., the re-setting of PPS rates to reflect cost experience from a more recent year. This article explores the rationales, scope, and impact of congressionally-mandated Medicare prospective payment rebasing for three health care services: home health, hospice, and end stage renal disease (ESRD).1 Using as an example the unified post-acute care PPS that Congress, in the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act), has required HHS to develop, we discuss the potential merits of a fixed, periodic rebasing model within Medicare PPS methodologies

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