Home Health & Hospice Week

Talk of a multi-year freeze persist.

A federal proposal to boost Medicare payments in 2007 would bring an estimated extra $460 million to home health agencies next year. The problem is, legislators may ax the adjustment for inflation.

"There's a lot of concern that this update is not going to stand," warns Mark Sharpe of BKD in Springfield, MO. The federal budget process still looms, after all--and legislators remain focused on reining in Medicare growth, he explains.

Reality check: The Centers for Medicare & Medicaid Services lays out in the proposed rule only what it is required to by current law: The 3.1 percent inflationary increase to Medicare's home health prospective payment rates mandated by the Medicare Modernization Act of 2003 (MMA). But, as the industry learned from last year's rate freeze, the MMA provision doesn't mean that an inflationary increase will ever make it into home health agency coffers.

What lawmakers grant, they can take away, notes Rick Ingber, president of VantaHealth Consulting in Philadelphia. "The likelihood is that the proposed increase will be legislated away," he says.

Expect Tighter Medicare Margins

In fact, in spite of the proposed rule's talk of an increase, home health agencies may want to brace themselves for a reduction in Medicare's PPS rates, some insiders say.

"There's been talk in Congress of a three-year freeze on home health rates," says Ingber. Momentum to rein in Medicare spending across the board is likely to continue--and to some lawmakers home health spending is a prime target.

Fuel for the fire: In March, the Medicare Payment Advisory Commission (MedPAC) recommended again that Congress eliminate the annual Medicare update for home health services, citing home health agencies' "more than adequate" Medicare profit margins. "Given that, it might even be a whim to get another freeze," allows Sharpe.

Read Fine Print For Rural Add-Ons

Rural providers may also be in for tougher times when it comes to Medicare reimbursement. The 5 percent add-on created by the MMA and granted last year sunsets on Jan. 1, 2007.

"We hope [Congress] will re-implement it," says Ingber, but that outcome also depends on the coming budget process.

Tip: The rural add-on will primarily affect those episodes that are paid based on calendar year (CY) 2006 rates, the proposed rule notes. But it could affect some episodes based on 2007 rates.

Rural add-on example: An episode that begins on Dec. 20, 2006 and ends on Feb. 17, 2007 would be paid based on CY 2007 rates because the episode ends on or after Jan. 1, 2007 and before Jan. 1, 2008. The episode would also receive the rural add-on because the episode begins on or after Jan. 1, 2006 and before Jan. 1, 2007.

Note: The proposed rule, "Medicare Program: Home Health Prospective Payment System Rate Update for Calendar Year 2007 and Deficit Reduction Act of 2005 Changes to Medicare Payment for Oxygen Equipment and Capped Rental Durable Medical Equipment," is available at www.cms.hhs.gov/HomeHealthPPS/downloads/CMS1304Pdisplay.pdf. The deadline for comments is Sept. 25.