Home Health & Hospice Week

Coming MedPAC report may dampen enthusiasm for new incentive-based model.

A year ago, it looked like home health agencies would have to gear up for a Medicare pay for performance system right away. Now, experts aren't so sure.

When the Democrats won both houses of Congress in the last elections, P4P slipped down on the Medicare priority list. "Congress remains interested [in home health P4P], but not as much as when the Republicans were in power," judges William Dombi, vice president for law with the National Association for Home Care & Hospice's Center for Health Care Law.

And now the congressionally mandated June report from the Medicare Payment Advisory Commission may further dampen enthusiasm for the payment model, if it reflects MedPAC commissioners' concerns aired in a March 8 meeting.

The basic set-up: MedPAC staffer Sharon Cheng once again proposed that the influential advisory body to Congress recommend a home health P4P system based on OASIS reporting. The system would compare Medicare patients in the same diagnosis group and would reduce overall payment rates to fund an incentive pool. The example used in the meeting re-duced rates by 5 percent to form the pool.

As suggested at MedPAC's last meeting, the report would recommend a system where agencies could pool data by combining two years' data or joining voluntary pooling associations (see Eli's HCW, Vol. XVI, No. 4). Patients whose chosen quality measures improve would count twice as much as patients whose measures stabilize.

The highest-performing agencies would receive a full bonus payment while agencies that exceed minimum standards and reach certain levels of improvement would receive a half bonus payment, Cheng suggested. The lowest-performing agencies would see reduced payment rates.

How it would work: The Centers for Medicare & Medicaid Services would have to reduce rates by the specified amount--in the example, 5 percent--at the beginning of the P4P period. Then after the period was over, CMS would calculate agencies' scores and distribute the withheld funds accordingly.

Home Health P4P Riddled With Problems

MedPAC commissioners were quick to point out the many flaws and challenges of a home health P4P system. Gaming of the system via OASIS could be a big problem, warned Commissioner Nancy Kane with the Harvard School of Public Health. When OASIS "starts to be the reason that you're paid ... a bonus or not, it's very subject to manipulation," Kane said in the meeting.

Agencies could also skew their data by cherry-picking patients, cautioned Commissioner Ralph Muller with University of Pennsylvania Health System. Policymakers should be careful to "reward performance rather than case selection," Muller said.

On one hand: Settling on a bonus pool size is also problematic. Withholding a percentage of reimbursement to fund a much-delayed bonus could be a significant financial hardship for some providers, suggested Commissioner John Bertko with Humana Inc.

On the other hand: A small amount such as the 1 to 2 percent discussed at earlier meetings or even the 5 percent pool used in the latest meeting may not be enough to motivate many home care providers, worried Commissioner Bill Scanlon, former Government Accountability Office top official. That's because under the home health prospective payment system, about one-fourth of agencies are reporting Medicare profit margins of more than 25 percent. "There's a question of whether ... the penalty is going to matter" to agencies with higher margins, Scanlon said in the meeting.

And the issue of such uneven distribution of profit margins won't be fixed until CMS issues its PPS refinement rule and it takes effect, if then. With the refinement rule facing delays, that won't be any time soon.

Other problems with home health P4P include inadequate risk adjustment of OASIS-based items used in the model and accurate measurement of care quality for a chronically ill patient population, commissioners said.

Risk adjustment is a major concern for one Missouri-based home health agency administrator. The current risk adjustment is "very superficial," the administrator tells Eli. Trying to compare chronically ill pa-tients with those who are receiving simple post-acute care is misleading. "You can't put everyone on one scale," the administrator insists.

More problems: The MedPAC model is flawed because it relies only on OASIS-based patient outcomes, not on process measures, Dombi adds. And P4P shouldn't penalize some agencies to reward others, maintains Bob Wardwell with the Visiting Nurse Associations of America.

An alternative: Wardwell is skeptical of a 5 percent reward pool. "Pulling that much money off the table for P4P is a uniquely bad idea," he says. Instead, MedPAC should recommend starting with no pool and just gathering data the first year. Then CMS could assess the rewards and withholds for the following year based on the previous year's performance. "That would ease cash flow by only pulling from the punishment group to finance the rewards group," Wardwell explains.

Don't Write Off P4P

Despite these difficulties, agencies are still likely to see a P4P Medicare model eventually.

"I would not take a big sigh and put it out of my mind," Wardwell warns. "This is the kind of thing that could come out of nowhere" in Congress' end-of-session wrap-up legislation.

However, Dombi believes lawmakers are unlikely to act on P4P until CMS finishes its demonstration project that is slated to begin in October (see Eli's HCW, Vol. XV, No. 45). That's especially true because the current proposals for P4P don't save Medicare any budget money.

Watch for: If Congress does want to get serious about legislating a home health P4P system, watch for hearings on the topic after MedPAC issues its mandated report in June, Dombi suggests.