Home Health & Hospice Week

Profits have seen some sharp peaks and valleys.

With the 2010s about to close, it’s a good time to look back at how Medicare profit margins have changed throughout the decade.

Here are home health agency profit margins as calculated by the Medicare Payment Advisory Commission:

• 2010: 19.4 percent
• 2011: 14.8 percent
• 2012: 14.4 percent
• 2013: 12.7 percent
• 2014: 10.8 percent
• 2015: 15.6 percent
• 2016: 15.5 percent
• 2017: 15.2 percent
• 2018: 15.3 percent

2019: TBD (Last year, MedPAC projected it would be 16.0 percent.)

In 2011, the year the profit margin dropped by about 25 percent, the Centers for Medicare & Medicaid Services made a big reduction for case-mix creep, implemented the physician face-to-face encounter requirement, and began requiring 30-day reassessments for therapy.

Industry experts have long contended that MedPAC’s profit margin calculations are deeply flawed. Problems include:

• MedPAC draws the margins from freestanding providers only, excluding hospital- and other facility-based agencies.
• With no direct reimbursement tied to the cost report under the prospective payment system, not enough effort and resources go into making sure the cost reports are accurate.

The report also excludes the cost of marketing, points out Tom Boyd with Simione Healthcare Consultants in Rohnert Park, California. Marketing costs are a normal course of business and permitted for Medicare Advantage Plans, for example. HHAs are not treated fairly in this regard.”

HHAs also often make the mistake of classifying community education, which is allowable, as marketing, which is not, Boyd adds.

And providers that furnish non-Medicare, non-skilled care will have too much overhead allocated to those services, Boyd maintains. “For example, Medicare QA, compliance, billing, [and] Nursing Administration, is more costly for skilled services than for homemaker services,” Boyd tells Eli. “However, the cost report allocates overhead to each business line based on the direct costs of each.”

In other words, “Overhead allocated to non- skilled services draws costs away from Medicare services thus increasing the Medicare ‘profit,’” Boyd says.

In reality, “total home health margins continue to be around 2 percent on average with nearly 25 percent of HHAs losing money on Medicare,” maintains National Association for Home Care & Hospice President William Dombi. “We do not see the data as supporting the recommen­dation in the least.”