Home Health & Hospice Week

MedPAC readies yet another steep rate-cut recommendation.

Medicare Payment Advisory Commission officials seem to think major payment reform isn’t enough change for 2020, and home health agencies also should undergo a 5 percent payment reduction.

In a Dec. 7 meeting discussing their preliminary recommendations to Congress for the next fiscal year, MedPAC commissioners signaled they support the significant payment rate cut for Medicare home health. If the influential advisory body finalizes the proposal in its March report to Congress, it will mark the third year in a row that the commission has recommended a reduction of that magnitude.

However: Congress has not taken up the drastic pay cut recommendation, notes the National Association for Home Care & Hospice. “This is likely the result of advocates within the industry relentlessly weighing in with their members of Congress on the value of home care, and that average profit margin is a limited look at the challenges providers face,” NAHC suggests in its member newsletter.

The most recent Medicare profit margin won’t help the industry’s efforts. MedPAC calculates the 2017 margin at 17.5 percent. That’s up from a 15.5 percent margin for 2016.

“Medicare has overpaid for home health since the PPS was established,” MedPAC staffer Evan Christman said in the meeting. “The fact that home health can be a high-value service does not justify the excessive overpayments.”

MedPAC is readying to push the cut despite these statistics:

• A 3 percent reduction in number of agencies in 2017, to 11,844. That’s down about 300 agencies from the previous year. While acknowledging the drop, Christman pointed out that “the supply of agencies has increased about 57 percent since 2004.” And he dismissed the reduction as “concentrated in a few areas, such as Texas and Florida, that have been the targets of efforts to reduce fraud.” The areas with decreases also have experienced “rapid growth in prior years,” Christman added.
• A drop in both number of episodes (down 3.1 percent) and number of beneficiaries served (down 1.7 percent). “Volume decreased slightly in 2017, but over [the] long term home health use has increased substantially,” Christman’s presentation noted. “Since 2002, episodes have increased 58 percent and spending is up 89 percent.” Medicare spent $17.7 billion on home care in 2017.
• An all-payer margin of 4.5 percent for 2017. The profit margin for all payers puts the 5 percent cut recommendation in perspective.
• Wide variance in Medicare margins. HHAs at the 25 percent mark for profit margin recorded a margin of only 0.7 percent. Those at the 75 percent mark had an average Medicare profit margin of 24.1 percent.
• Home care spending accounts for only 3 percent of overall Medicare spending.

MedPAC also noted that the Patient-Driven Groupings Model is going to shake up the industry with its elimination of therapy as a case mix factor, transition to 30-day episodes, and 6.42 percent behavioral adjustment payment rate reduction. “These will be the most significant changes to the PPS since it was implemented,” Christman said in the meeting. “These changes are intended to be budget-neutral but will redistribute payments among providers.”

Christman reiterated the point he’s made in previous years, that the industry is “nimble” and will adjust quickly to the new payment system or cuts.

The commissioners who spoke at the meeting expressed support for the 5 percent cut, including professor and think tank member Paul Gins-burg, who noted in the meeting that he was formerly a home care nurse. Commissioners will formally vote on the recommendations in their January meeting.