A proposal to overhaul how Medicare pays for post-acute care services is getting severe pushback from the hospital industry, which is concerned about “numerous fundamental flaws.”

The Department of Health and Human Services (HHS) and the Office of the Assistant Secretary for Planning and Evaluation released a report to Congress (PDF) outlining a unified payment model for long-term care hospitals, rehab facilities, nursing homes and home health agencies. But the American Hospital Association (AHA) said the draft model has major flaws.

“The draft model lacks a comprehensive and reliable risk adjustment approach, which endangers access to care—particularly for the most critically ill patients,” said AHA Executive Vice President Stacey Hughes in a statement late Thursday.

A 2014 law calls for the development of a prototype unified payment system that sets payments for post-acute care services based on beneficiary clinical characteristics rather than the type of provider, according to HHS’ report to Congress. 

The model would base payments on several factors related to the cost of care and other needs. For example, it would unify payments into three general categories: rehabilitation; medical; and diagnosis and medical management, teaching and assessment. 

It would also create new indicators based on whether the provider is in a rural area. Another indicator would reflect the type of post-acute care setting the beneficiary was treated in, according to the report. A final payment to a post-acute care provider would be calculated via a conversion factor that includes additional adjustments for labor in a specific geographic area.

But HHS cautioned that there are several major steps that need to be taken for the draft model to go into effect. For example, the agency relied on data from 2017 to 2019 and doesn’t factor in the COVID-19 pandemic. 

There are also new revised payment systems for home health agencies and skilled nursing facilities. 

“Although we believe that the clinical concepts and analytic approach upon which the prototype is based are sound, it will be important to understand the implications for costs of care of COVID-19 and the revised payment systems, and to recalibrate the payment weights accordingly,” the report said.

HHS also doesn’t include any new legislative recommendations and added that a unified payment structure would not be able to be done via the Centers for Medicare & Medicaid Services’ existing statutory authority. 

But Hughes said in a statement that HHS relied on inconsistent definitions and guidelines for crafting the clinical characteristics, and the agency relies on “out-of-date patient utilization patterns and patient care protocols.”

She added that the model could fail to align payments with the costs used for treating such a wide patient population.

AHA wants Congress to not consider the model for any future action.

“The agencies should go back to the drawing board to create a solution that both reflects the current health care delivery system and ensures access to care for all Medicare [post-acute care] patients,” Hughes said.