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 Quick Facts

  • In 2012, Medicare spent $62 billion on post-acute care.
  • Post-acute care accounts for 17% of Medicare fee-for-service spending.
  • MedPAC found IRFs were paid $5,000 more for stroke patient stays compared to SNFs.
  • IRFs were paid $4,000 more for major joint replacement stays compared to SNFs.
  • AHCA’s Site-Neutral Solution would save Medicare $15-20 billion over 10 years.

 The Benefits of Site-Neutral

  1. Benefits the patient by adequately assessing the care needs of the patient and the proper setting for receiving care
  2. Facilitates coordinated, efficient care delivery by improving care transitions and incentivizing high-quality performance and improvement
  3. Advances quality improvement by focusing on health outcomes for each patient
  4. Savings to Medicare are estimated between $15-20 billion over 10 years

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Site-Neutral Payments

​Existing Medicare payment policies focus on phases of a patient’s illness defined by a specific service site, rather than on the characteristics or care needs of the Medicare beneficiary. As a result, patients with similar clinical profiles may be treated in different settings at different costs to Medicare. This payment system fails to encourage collaboration and coordination across multiple sites of care and provides few incentives that reward efficient care delivery. Such misalignment has been understood and acknowledged for a very long time. AHCA has a solution to address this age-old issue – a site-neutral payment policy.

 AHCA's Solution


​AHCA supports a site-neutral payment system for post-acute care which would focus payments on patients rather than their setting of care. Under AHCA’s solution, patients would be grouped by clinical condition and severity of illness, and the payment for patients within each group will be the same regardless of where the patient is being treated. The payment rates for each category would cover the expected costs of providing the appropriate type, duration and mix of services. A single Medicare payment would be made to each post-acute care provider to cover the services provided to the patient.

Such a model has the potential to reduce Medicare spending by approximately $15-20 billion over a 10-year budget window. Meanwhile, this model encourages better care coordination and a more efficient post-acute care system, resulting in benefits to the patient through higher quality of care.


 The Case for Site-Neutral



In March 2014, MedPAC unveiled its case for site-neutral payments for several conditions that are treated in both skilled nursing facilities (SNFs) and in-patient rehabilitation facilities (IRFs). The MedPAC data and analyses are compelling and groundbreaking. The Commission examined three specific conditions: stroke, major joint replacement, and hip fractures. They concluded the following: 

  • For select conditions, characteristics of beneficiaries admitted to IRFs and SNFs in the same market were similar;
  • In addition, the prevalence of comorbidities of beneficiaries were similar but patients treated in SNFs were more likely to have several of the comorbidities; 
  • Outcomes between IRFs and SNFs were basically the same for the identified conditions.  There were no significant differences in risk-adjusted readmission rates between IRFs and SNFs; no significant differences in mobility, and, with respect to self-care, there were no significant differences for orthopedic conditions but some higher rates of improvement for IRF patients. 

The Commission concluded that the work on orthopedic conditions was a strong starting point for a site-neutral policy. MedPAC staff will continue to explore site neutral payment between SNFs and IRFs. 

Download MedPAC’s Findings >>

Other Supporters

A few of the key milestones in the site neutral discussion include the following:

  • The Deficit Reduction Act (DRA) of 2005 mandated a demonstration that supports site-neutral.  This mandate resulted in the development of a common assessment tool which could facilitate significant movement toward the ability to compare patients across settings. This assessment tool could also help reshape current PAC payment systems to pay for similar services to similar patients, despite the settings.
  • In the April 2013 Moment of Truth Project report, “A Bipartisan Path Forward to Securing America’s Future,” the co-chairs, Erskine Bowles and Senator Alan Simpson proposed reforming PAC payments and included a proposal to equalize payments between across PAC settings. 
  • The Fiscal Year 2014 “President’s Plan For Economic Growth And Deficit Reduction, Legislative Language and Analysis” proposed to restructure PAC payments. The legislative language proposed to adjust Medicare payments for three conditions involving hip and knee replacements and hip fracture as well as other conditions selected by the Secretary at her discretion. The Budget indicated these conditions are commonly treated at both IRFs and SNFs, but Medicare pays significantly more for patients treated in IRFs. The Budget clearly stated that IRFs provide intensive inpatient rehabilitation care that may not be needed for patients with certain conditions and whose care needs could reasonably be expected to be met in a SNF.

Download “The Case for Site Neutral” >>