Home Health & Hospice Week

Small, rural players especially vulnerable, experts say.

"When"--not "if"--should be the essential word when considering how Medicare pay-for-performance is likely to reshape your business.

"The train has left the station," stresses Ron Clitherow, senior manager for Larson, Allen, Weshair & Co. in Charlotte, NC.

To stay competitive, home health agencies--especially small players--need to recognize that P4P will bring a paradigm for care to home health, says Clitherow, much as Medicare's prospective payment system did.

"Agencies can't afford to pretend pay-for-performance isn't happening," agrees Amanda Twiss, president of Seattle, WA-based benchmarking company Outcome Concept Systems.

Assess The Risks

The estimated 7,500 home health agencies that bring in less than one million dollars annually in Medicare revenue will be particularly vulnerable to the new payment system's demands for better care for fewer dollars, says Clitherow.

P4P rewards quality and efficiency regardless of size, but small players are at a disadvantage in making the investments necessary to thrive under a payment system where the feds reward quality and efficiency with extra payments.

Anticipate costs: P4P will prompt agencies to increase spending on OASIS training, information technology and clinical training, for example.

Disadvantage: Rural agencies bear more of the burden of caring for chronically ill "dual eligibles," beneficiaries who qualify for both Medicare and Medicaid services. "Those patients aren't admitted with high acuity diagnoses, so there's not as much room for improvement," Clitherow notes.

Those home health agencies may need to pay especially close attention to financial efficiency, he says, since they're not likely to be rewarded under a P4P system.

Band together: Sharing overhead costs by joining other small regional players in a type of "home care services organization" may be one way to operate more efficiently, Clitherow suggests. For example, agencies could share the cost of improving IT, a vital step in preparing for P4P.

Innovate, Don't Procrastinate

Regardless of size, agencies can best prepare by continuing to look at their operations to be sure both clinical and operational areas are the most effective and efficient they can be, stresses Judy Adams of LarsonAllen in Chapel Hill, NC.

"All agencies need to concentrate on improving their outcomes of care, defining and implementing best clinical practices," suggests Adams. HHAs should also continue development of their electronic capabilities in telemedicine, medical records and data analysis, she adds.

Focus: Three quality of care measures that are likely to be paramount under P4P: rates of rehospitalization, oral medications and falls.

Prepare Now For New Paradigm

Strategy: P4P may signal a turning point for home health care, predicts Adams.

For some, success under P4P may come from specializing, for example. "Agencies may want to consider some redefinition of roles much like the specialty areas in the hospital," says Adams.

Bottom line: With P4P all but a reality for home health, one thing is clear. Medicare margins, overall, will be down for the industry, experts say.

"The fundamental question becomes, 'How do we operate successfully within a higher cost, lower margin industry?'" says Clitherow.

Note: For more tips on preparing for pay-for-performance, see Eli's HCW, Vol. XV, No. 13 and Vol. XV, No. 15.