Home Health & Hospice Week

Industry fights back against proposed reductions

Industry representatives were quick to discredit the Medicare Payment Advisory Commis-sion's forthcoming recommendations and the analysis that underlies them.

"These recommendations will devastate home health care with over half of the agencies ending up in the red," says Val Halamandaris with the National Association for Home Care & Hospice.

The average Medicare margins for Visiting Nurse Association of America members will slip to a loss in 2010 if the MedPAC recommendation is adopted by Congress, VNAA agrees in a statement.

Some states would have more than 70 percent of agencies with negative margins under the cuts, NAHC points out.

"If the crude instrument of across-the-board cuts continues to be used to restrain profitability in the PPS system, the result will be the gutting of the Medicare home health benefit," adds VNAA's Bob Wardwell, who was the architect of PPS when he was at CMS.

MedPAC's analysis falls "far short of what is needed to undertake informed action in any payment model reforms," NAHC contends. The commission needs to get at the reasons why margins vary so greatly in home health as opposed to other provider sectors.

"They never go deep enough to get to real information," NAHC's William Dombi says of MedPAC. "Looking at broad averages in a program that provides a very diverse set of services to an extremely varied patient population in extremely distinct residential settings as a concept is severely flawed," Dombi says in a release.

One theory: Based on their comments in the meeting, a number of commissioners feel the high-end profit margins are due to gaming the system rather than efficiencies.

The influx of 2,400 new agencies since 2003 could mean new entrants were ramping up margins while existing providers were paid appropriately, noted Commissioner Michael Chernew, a health care policy professor at Harvard Medical School. Then when the rate cuts hit, the legitimate providers will be driven out while the new "gamers" stay on.

"You end up having a situation where the bad drive out the good," Chernew pointed out. "You have used the gaming numbers to ... drive down payment rates."

Other commissioners also saw the risks of implementing across-the-board cuts. "When we re-base, we are actually reducing the rewards to gaming, but we are also penalizing the care providers," warned Commissioner Bill Scanlon, former head of the Government Accountability Office.

Rural concerns: Rural agencies might be particularly hard hit by the cuts, predicted South Dakota physician Thomas Dean. "In my area, agencies tend to be very small, and they tend to serve patients in a very widely dispersed area, so their costs are high," Dean said in the meeting. "They may go 20, 30 miles between patients, so their costs are clearly going to be high and their margins are going to be low."

The cuts wouldn't disproportionately affect rural HHAs, MedPAC staffer Evan Christman said.

"But there is rural and then there is rural," Dean observed. "It can be a real challenge to deliver some of these services, and I would just like to be sure ... that they are somehow protected here."

MedPAC should also realize that HHAs are serving a very different population than during the base year for PPS, pointed out Commissioner Nancy Kane, a professor at the Harvard School of Public Health. The population has shifted dramatically from chronic needs to post acute.

But despite the concerns commissioners voiced, they voted unanimously to include all three recommendations in MedPAC's March report to Congress.

Task ahead: "Home health care will have the burden of proving MedPAC's advice to be unworthy of acceptance" to Congress, NAHC notes.