Home Health & Hospice Week

MedPAC wants 2008 update eliminated, report to tell Congress

After declaring victory on the 2007 Medicare rate update, home health agencies must set their sights on another uphill battle--securing the inflation increase for 2008 rates.

In its Jan. 9 meeting, the Medicare Payment Advisory Commission voted to recommend that Congress freeze Medicare payment rates for HHAs in 2008. MedPAC had proposed the freeze recommendation in December (see Eli's HCW, Vol. XV, No. 44).

Congress doesn't "blindly" accept MedPAC's recommendations, notes the National Association for Home Care & Hospice. The Commission has recommended a freeze every year for the last five years, but only once has Congress passed it, NAHC tells members in its newsletter.

But home care reimbursement makes a "tempting target" for Congress because it's looking for funding sources to fix physician inflation update problems, points out the American Association for Homecare.

"2007 will bring another year when home care must fight to preserve its inflation update," NAHC's vice present for law William Dombi says in the newsletter.

The industry will have to pull together and reach out to their congressional representatives like never before, predicts Bob Wardwell with the Visiting Nurse Associations of America. "If we don't put up an unprecedented fight for the 'cheese' this year, there are lots of hungry mice out there who are already at work--and they don't share," Wardwell tells Eli.

Red flag: And agencies could have even worse reimbursement woes in store, warns Tom Boyd with Rohnert Park, CA-based Boyd & Nicholas. High average profit margins combined with widespread reports of kickbacks for referrals could mean an Operation Restore Trust-style crackdown is ahead for the industry.
 
If so, losing the inflation update could pale in comparison to draconian payment measures reminiscent of the interim payment system that put one-third of the industry out of business in the late 1990s.

High Profit Margins Dog Industry Efforts

MedPAC based its recommendation partially on industry profit margins. The average Medicare margin for 2005 was 16.7 percent. The top 25 percent of HHAs had margins higher than 27 percent while the bottom 25 percent had margins below 2.3 percent.

The incredibly wide variation in margins did seem to give the Commissioners pause. A number of them requested more information and expressed a desire to see distribution problems inherent in the home health prospective payment system fixed.

But fighting a freeze based on the wide distribution of margins won't be a foolproof argument, warns consultant Rick Ingber with VantaHealth Consulting in Jenkintown, PA. Lawmakers' response may be "why should we shore up the lower-margin providers if they're not as efficient?" Ingber says.

MedPAC also ignores facility-based agencies' margins in calculating those figures, points out Judy Adams with Charlotte, NC-based LarsonAllen. They're the ones "who continue to have the greatest losses under PPS," she tells Eli.

But lawmakers can easily dismiss those lower margins as cost report allocation issues, Ingber says.

Legislators should realize agencies' margins are getting smaller, Adams maintains. HHAs are pressured by a laundry list of cost factors, she notes--nursing and other health care personnel shortages, technology for information systems and telehealth, shifting of the caseload mix from Medicare to Medicaid and managed care, deletion of the rural add on and full conversion to new CBSA-based wage indices without the opportunity for HHAs to gain exceptions through reclassification the way hospitals can.

"Many HHAs saw decreases and very slim margins for 2006," Adams says. "The days of large margins may be quickly disappearing."

Winners: Mid-size agencies seem to be faring the best under PPS these days, Ingber suggests. HHAs that are too small don't have the resources to efficiently manage patients while agencies that are too big often don't manage patients in enough detail to keep costs under control, he says.

MedPAC's Access Findings Questioned

MedPAC also based its freeze recommendation on the assertion that Medicare patients have good access to home care services. Ninety-nine percent of benes live in a zip code serviced by an HHA, MedPAC staffers note.

But access to home care has been reduced over time, Boyd insists. "Who speaks for the beneficiary who will not be getting home health services because they live 'too far out?'" he asks.

Because Medicare is an entitlement program, "every enrollee should have access to it," Boyd argues. "They do not."

Upside: Providers can take heart that MedPAC Commissioners are calling for improvements to PPS, Wardwell says. The Commission has offered a "virtual pledge" to "get involved in making recommendations to fix the PPS system next year if [the Centers for Medicare & Medicaid Services] fails to get the job done" in its PPS refinement rule due out any day.