Home Health & Hospice Week

Think ahead on financing options.

Under the new value-based purchasing program CMS is designing, your cash flow problems may start sooner than you think.

One important way in which the VBP program will differ from the earlier pay for performance demonstration is where the pool of money will come from.

Old way: Under the demo, the Centers for Medicare & Medicaid Services did not penalize any agencies for performance. The pool to reward high-achieving and most-improved agencies came after the fact from Medicare savings generated.

New way: CMS will penalize bottom-performing agencies to reward top-performing agencies. The agency will reveal details on where the reward and penalty thresholds will fall, and how wide the “neutrality band” in the middle (receiving neither rewards nor penalties) will be, in the rulemaking next year.

Because the program must be budget neutral, financial expert Pat Laff expects to see CMS withhold the reward/penalty amount of up to 8 percent, then dole it back out the next year as rewards for the top performers and even paybacks for the neutrality band. Poor performers won’t receive any money back from the withhold.

In that scenario, agencies had better be prepared to operate on 5 to 8 percent less cash in 2016 no matter how good their outcomes are, Laff warns. If they can’t, they’ll need to line up financing before the program begins to cover the shortfall.

Beware: Bankers probably won’t be lining up to furnish you with a loan. Financing will be hard to come by for agencies that have poor outcomes or that don’t have a way to guarantee that they can pay it back, Laff says.

Note: For tips on preparing for VBP, see a future issue of Eli’s Home Care Week.