Home Health & Hospice Week

HHAs' continuing high average profit margins may seal their fate next year.

Home care providers are waiting on pins and needles to see if their 2008 inflation update will hold.

Even with the update, home health agencies' payment rates will increase very little this year. That's due to the Centers for Medicare & Medicaid Services' 2.75 percent cut for supposed case-mix creep.

If Congress passes a rate freeze and allows the case-mix creep cut to go through, agencies will take a punishing "double hit," protests the National Association for Home Care & Hospice. Right now it's unclear whether a Medicare package or Medicare provisions within a larger omnibus budget bill will pass.

The cut for upcoding would strip $9 billion over five years from HHAs' payments, while the rate freeze would slash another $3 billion during that period. "That makes a $9 billion cut from a $13.2 billion industry ...quot; which is neither right nor fair," NAHC argued in an ad placed in DC paper Roll Call last week.

Agencies' case wasn't helped by the 2006 Medicare profit margin figures released by the Medicare Payment Advisory Commission at its Dec. 7 meeting. MedPAC found HHAs' overall margin to average 15.4 percent. Agencies once again had a very wide distribution, with HHAs at the 25th percentile having only a 1.2 percent average margin, while providers at the 75th percentile had a 26.2 percent profit.

Breakdown: Providers that serve both urban and rural beneficiaries showed a 17.2 percent Medicare margin, while those serving rural beneficiaries only had a lower 14.3 percent profit figure, explained MedPAC staffer Evan Christman. For-profits recorded margins of 17.4 percent while not-for-profits saw lower 11.6 percent rates.

Those margins suggest that agencies shouldn't just get a rate freeze, but a 5 percent reduction to Medicare payment rates, fumed commissioner Jack Ebeler at the meeting. "It's very hard to look at this ... and say zero is the lowest possible number," said Ebeler, a health care policy consultant most recently with the Alliance of Community Health Plans.

The Senate is giving signals that it won't include HHA cuts in its Medicare package, NAHC reports. But the House is more likely to do so. And with President Bush's threatened veto of any bill containing Medicare Advantage cuts--lawmakers' current prime funding source for the physician fix--home care could easily come up on the chopping block, observers warn.