Home Health & Hospice Week

The home care industry's high profit margins grab national attention.

Home health agencies' chances of avoiding punishing Medicare payments cuts in 2013 have grown slimmer.

In its latest report to Congress, the Medi-care Payment Advisory Commission calls on lawmakers to implement three reimbursement-reducing initiatives -- a $150 copayment for Medicare home health episodes, elimination of an inflation update next year, and acceleration of prospective payment system "rebasing" (i.e., payment cuts) currently scheduled to begin phasing in in 2014.

The influential advisory body to Congress trots out statistics showing increased utilization and spending on home care services, which have resulted in figures that exceed pre-Operation Restore Trust levels of the late 1990s. For example, there were about 10,900 HHAs in 1997 but only 7,500 agencies in 2000, the first year of PPS after the industry underwent the interim payment system that closed about one-third of the industry's doors. In 2010, there were about 11,800 HHAs.

Most damning to agencies' budget hopes are profit margin figures for 2010, the latest year available. Agencies averaged a 19.4 percent profit margin in that year, MedPAC reports.

"Medicare continues to overpay for home health services," MedPAC claims in the report. "The high margins ... reflect that payment substantiallyexceeds costs." Recent reimbursement cuts and Centers for Medicare & Medicaid Services ad-justments for items like upcoding haven't "significantly reduced" payments, the report claims.

Those eyebrow-raising margins have gained national attention in a USA Today article focusing on the figures. "Why would they come in if there weren't some kind of economic opportunity?" Mark Miller, MedPAC's executive director, told the newspaper. "We're getting 200 a year entering the business. Even in rural areas, our average profitability is pretty high."

Copay Will Lead To More Hospitalizations

Industry groups have come out against the copay and rebasing recommendations. Copays shift costs to beneficiaries, protests the Visiting Nurse Associations of America. "Patients who are eligible for home health have already been subject to multiple co-payments for physician and hospital care," notes VNAA's Andy Carter in a release. "From experience, our nonprofit members know that without home care these patients will likely be re-hospitalized at much greater cost."

Don't forget that there's "a lag in available cost report data upon which the recommendations are based," lobbying group the Partnership for Quality Home Healthcare points out. MedPAC's projected profit margin for 2012 drops to 13.7 percent based on cuts put in place since 2010.

"Instead of using blunt instruments, such as copayments for low-income seniors or across-the-board reimbursement changes, the Partnership asks lawmakers to instead focus on strengthening Med-icare and Medicaid through program integrity and payment reforms," PQHH says in the release.

"Abusive billing practices are occurring in isolated pockets of the country," PQHH notes, pointing to MedPAC's list of highest utilization counties (see box, this page). "As a result, the home healthcare community believes policy makers should undertake action to address targeted problems with targeted solutions."

Fraud, Therapy Recs Received Better

The industry does seem generally to agree on MedPAC's recommendation to increase CMS's fraud fighting efforts by increasing medical review in high-utilization counties, among other activities. VNAA goes a step further by calling for targeted moratoriums on HHA and hospice enrollment.

VNAA also supports MedPAC's suggestion to remove therapy utilization from the PPS case mix system. But "any such revisions must be done in a way that does not harm vulnerable patients," the trade group cautions.

Watch for: While it didn't make a recommendation about the rural add-on, MedPAC did note that many of the high-margin counties are rural. "Medicare's add-on payments based solely on rural designation are not as well targeted as they could be," the report suggests. A MedPAC recommendation on that element could be forthcoming in future years, observers suspect.

Note: The MedPAC report is at www.medpac.gov/documents/Mar12_EntireReport.pdf.