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Home Health & Hospice Week

Legislaton - MedPAC To Congress:

Freeze HHA Payments

Published on Thu Mar 04, 2004

HHAs must battle high-roller rep. 

Two government agencies have delivered a one-two punch this week to home health agencies' efforts to secure fair reimbursement from Medicare.

The Medicare Payment Advisory Commission has advised Congress to freeze HHAs' payment rates for fiscal year 2005 in its annual report to lawmakers March 1. HHAs currently are slated for a market basket index-minus-0.8 percent inflation increase for FY 2005, which starts Oct. 1.

MedPAC bases its recommendation partly on profit margin figures it has generated, which the industry disputes (see "Inefficient HHAs to Blame for PPS Losses, GAO Says").

Instead of revising the prospective payment system to pay fairly for all case mix categories and give all agencies relatively moderate margins, MedPAC appears to be recommending a cut for everyone in order to go after the cherry-picking agencies with the highest margins who are presumably serving the most lucrative patients.

MedPAC also bases its recommendation on findings that access to home care is good, quality of home care is stable, and there are more agencies entering than exiting the Medicare program now.

Who Will Congress Listen To? 

The high profit figures from MedPAC and the General Accounting Office combined with MedPAC's other data means the industry "has a fight on our hands," admits William Dombi, with the National Association for Home Care and Hospice.

The industry must explain to Congress "that the system is flawed, and it won't help to freeze payment rates and hurt all the negative-margin providers," Dombi tells Eli. Instead, reallocation of PPS funds is needed.

MedPAC claims home care providers' costs won't increase in 2004 due to clinical changes and technology savings, a "speculation" that is "folly," Dombi scoffs. But even if costs do go up, agencies' "very high" margins will cover them more than adequately, MedPAC maintains in the report. "The high margins will persist," it says.

However, findings in MedPAC's own report point to reasons that's not the case, experts say:

  • Access. Twelve percent of beneficiaries surveyed by the Centers for Medicare & Medicaid Services' Consumer Assessment of Health Plans said they had "a big problem" accessing home care services in 2002. Another 13 percent reported "a small problem." These figures could include beneficiaries who weren't eligible for home care, though, MedPAC points out.

  • LUPAs. CMS expected agencies to respond to PPS incentives by taking episodes with five or fewer visits from 15 percent in 1997 to 5 percent under PPS. Instead, low utilization payment adjustment (LUPA) episodes were still at 14 percent in the first half of 2003.

  • Wall Street. Despite CMS' generous view of HHA profits, investment firms are still rating HHA companies as risky, CMS research found.

  • Capital. Likewise, lenders are reluctant to give credit to home care companies. MedPAC dismisses lack of access to capital as "not informative" because home care is not a "capital intensive" industry.

    But CMS says in its own report on the market that capital access is "a key indication of how an industry is performing," American Association for Homecare CEO Kay Cox points out.

    And MedPAC builds efficiencies gained from telehealth into its spending projections, but without capital HHAs can't purchase those telehealth systems, Cox adds.

  • Beneficiaries excluded. Home care use has declined since 1996 for patients with no caregivers and patients with chronic care rather than post-acute care needs, MedPAC admits.

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