Home Health & Hospice Week

Brace for wave of closures and sales.

CMS has pared back the home health agen-cy rate cuts it proposed this summer, but the slight improvement won’t avert disaster for many providers.

The Centers for Medicare & Medicaid Ser-vices will slice 3.5 percent per year off home health prospective payment system rates for the next four years, CMS says in the 2014 HH PPS Final Rule published in the Dec. 2 Federal Register. An Afford-able Care Act provision to rebase HHA Medicare payment rates established a 3.5 percent cap on rebasing reductions. Commenters on the PPS proposed rule issued in June protested the reduction vociferously, but CMS sticks by its use of the maximum rebasing reduction allowed by the ACA.

However: CMS did listen to commenters’ arguments about the technicalities of calculating the 3.5 percent figure, resulting in a "modest improvement" to the 2014 rate, notes the National Associa-tion for Home Care & Hospice.

CMS’ "initial interpretation" of the 3.5 percent cap was based on payment figures for 2013. However, commenters contended that CMS should calculate the cap using the CY 2010 payment rates. "Upon further review of the specific language in the statute, we agree with the commenters," CMS says in the final rule. "Therefore, as specified by statute, the rebasing adjustment is limited to 3.5 percent of the CY 2010 national, standardized 60-day episode payment rate of $2,312.94 ... or $80.95."

Previously, CMS proposed that the cut equal 3.5 percent of the 2013 rate, or $99.56. The same 2010 figure will apply in future years as well, CMS adds in the rule. "We are limited to implementing a reduction of $80.95 to the national, standardized 60-day episode payment amount each year for CY 2014 through CY 2017."

The result: The 2014 final rule reduces Medicare HHA payments by 1.05 percent, CMS notes in a release. "This amount reflects the combined effects of an increase in the home health payment update percentage of 2.3 percent, offset by a decrease of 2.7 percent — the result of rebasing the adjustments required by the Affordable Care Act — and a 0.6 percent decrease due to a refinement of the HH PPS Grouper," the agency explains.

In the proposed rule, CMS floated a 1.5 percent decrease based on the different cap calculation methodology and other data differences (see Eli’s HCW, Vol. XXII, No. 24). The agency wanted a base rate of $2,860.20 ($2,946.01 in rural areas), up a significant amount from the current $2,137.73. Now, the 2014 base rate will be $2,869.27 — a $9.07 increase. (CMS will reduce payment by 2 percent for agencies that don’t report required quality data.)

Remember: Don’t get too excited about that higher base rate figure. CMS is also slashing all case mix weights so that the average weight of 1.3464 will be 1.00, the agency says in the final rule (see related story, p. 333).

Another improvement: However, CMS listened to commenters’ arguments in this area as well. "Commenters stated that CMS did not account for the removal of the ICD–9–CM codes from the case-mix system, which is estimated to drop the average case-mix weight from 1.3517 to 1.3417, in either the adjustment to the case-mix weights or the payment rates," the agency says in the rule. "We find these comments compelling and we plan to change the adjustment to the weights so that it reflects the estimated average case-mix after the removal of the ICD–9–CM codes from assignment to one of our diagnosis groups within the HH PPS Grouper."

The fact that CMS isn’t "double dipping" with the diagnosis code changes is good news, notes attorney Robert Markette Jr. with Hall Render in Indianapolis.

One scenario: To understand how the cuts will affect rates, look at this example from NAHC: Grouper code 30321, C3F2S1, has a multiplier of 1.1054. In 2013, that would lead to a payment of $2363.05 (before wage index impact). The 2014 multiplier for C3F2S1 is 0.8210. With the rebased episode rate of $2,869.27, the episode payment will be $2,355.67 or $7.38 less than this year’s rate. Under the proposed rule, the reduction would have been worse — a payment of $2,339.07 or $16.60 less than the final rule level.

Batten Down The Hatches In 2014

Even with those minor improvements, CMS will strip $200 million from HHA payments in 2014 alone. That includes a $440 million increase due to the inflation update, added to a $520 million de-crease due to rebasing and a $120 million cut due to the grouper refinement, CMS explains in the rule.

Financial expert Pat Laff with Laff Asso-ciates expects the real dollar loss figures to be much higher than CMS projects. The CMS estimates contain "a lot of smoke and mirrors," Laff tells Eli.

"They’re underestimating the impact" of the cuts, Markette agrees.

Even the cuts CMS projects will devastate the industry, experts say.

"Congress asked CMS to do a comprehensive evaluation of the home health benefit, to isolate what works and what needs improvement, how to increase access and efficiency, and how to reduce costs while improving the quality of care. CMS did none of this," says NAHC’s Val Halamandaris in a statement. "In-stead, all they did was look to impose the largest possible cut —3.5 percent a year — on the Medicare home health benefit. This adds up to 14 percent over the next four years, or a total of $22 billion."

HHAs have had their rates hit harder than any other provider sector in recent years, Markette insists. "I don’t know how much more they can take."

On top of $79 billion in cuts HHA have endured since 2009, this year’s reductions will push home health reductions past the $100 billion mark, NAHC says.

"The clear conclusion is that saving money is more important to CMS than serving those who are so sick they cannot leave home without assistance," Halamandaris maintains. "There is no way that CMS can claim they did not know their actions would result in regulatory mandated bankruptcies."

The rule will result in "thousands if not millions of Medicare patients [losing] the right to re-ceive home care services," he adds.

Rebasing reductions "most definitely will curtail access to the benefit," agrees the Visiting Nurse Associations of America. "We are extremely disappointed that CMS would so dramatically reduce funding — especially because patients, physicians and hospitals want to increase use of the Medicare home health benefit to avoid institutional care for patients who can have their medical needs met at home," VNAA’s Tracey Moorhead says in a release.

"CMS cuts in Medicare home health mean that many homebound patients will lose the option of receiving skilled care at home and be admitted to high cost acute care, institutional settings, which is an outcome that is in direct conflict with the goal of reducing unnecessary care and costs," Moorhead predicts.

Denial Stage Must End

"Everyone in home care is very upset about the impact of rebasing," says Robert Wardwell, the former architect of HH PPS at CMS who now works with VNAA.

Some had been "hoping CMS would be a little bit more reasonable and realistic" in the final rule, Laff notes. Now those providers have to face reality.

"The final rule is bad news," says consultant Tom Boyd with Boyd & Nicholas in Rohnert Park, Calif. "Some providers thought the proposed rule was so bad that surely common sense and NAHC would get the impact lessened," but CMS has stood its ground except for the "very slight" tweaks.

While "every little bit helps" and some improvements are better than none, rebasing cuts are "a train wreck," Markette warns. And they are compounded by the fact that many agencies are getting socked with ADRs left and right, from Recovery Audit Contractors and others, and often seeing denials based on face-to-face documentation, he says (see Eli’s HCW, Vol. XXII, No. 38)

"You can’t keep cutting rates on the front end and taking money on the back end," Markette protests. "They just keep piling on home health."

HHAs will have to face these brutal cuts even as their own costs go up dramatically — particularly for labor and the Obamacare employer mandate, Laff notes.

Boyd expects to see struggling HHAs try to sell in the New Year — but they may already have missed their window. Boyd is "beginning to see smaller providers close or go lacking for buyers," he says. "The pressures will be increasing and I look for increased numbers closing or selling."

Wardwell wishes CMS would have "pushed the Vulnerable Patient Study (VPS) research harder and had some off-setting redistributional policies to implement at the same time based on the VPS," he tells Eli. "The worst of this, after all, is the prospect of more and more patients losing access to home care and getting either no care and/or institutional care."

"I suspect that the constant negative drumbeat from MedPAC and the pressure to reduce costs in the Federal Budget kind of boxed CMS into making these damaging cuts," Wardwell muses.

Home care industry reps aren’t taking the damaging cuts lying down. "Congress made the law and only Congress has the power to restrict or limit its application," Halamandaris says. "We intend to appeal to Congress to repair this great injustice." NAHC is also exploring a lawsuit, possibly based on the U.S. Supreme Court’s Olmstead decision requiring care to be furnished in the least restrictive environment, the trade group hints in its release.

"I don’t know anyone in the homecare community who is giving up on the people we serve," Wardwell says. "I hope to see this thing reversed or modified before the next cut is phased in."

Note: The final rule is at www.gpo.gov/fdsys/pkg/FR-2013-12-02/pdf/2013-28457.pdf. For tips on how to deal with lower rates in 2014, see a future issue of Eli’s HCW.