Home Health & Hospice Week

There's no end in sight for case mix creep cuts to HHA reimbursement.

Will an extra $1.60 per episode be enough to cover all your increased costs in 2009? If not, you're out of luck, because that's what Medicare intends to pay you next year.

The home health agency base episode payment rate will increase to $2,271.92, the Centers for Medicare & Medicaid Services says in the PPS rate update notice in the Nov. 3 Federal Register. That's up from $2,270.32 currently.

The reason for the low increase is the multi-year case mix creep adjustment, CMS explains in the notice. CMS calculated the 2009 inflation update as 2.9 percent, but the 2.75 percent reduction for supposed case mix creep negates most of it.

The meager 0.15 percent increase will result in an additional $30 million in HHA payments in 2009, CMS says in a release.

One exception: Low utilization payment adjustment (LUPA) amounts aren't subject to case mix creep adjustments, so they will rise by the 2.9 percent market basket increase (see chart, p. 307).

The case mix creep adjustment does affect nonroutine supplies payment levels, however. The NRS conversion factor goes up just four pennies to $52.39 this year, resulting in NRS categories that increase from 1 cent to 43 cents, depending on the severity level (see chart, p. 307).

Many industry experts were surprised by the low rate increase. "Essentially it didn't move," financial consultant Pat Laff with Laff Associates in Hilton Head, S.C., says of Medicare's HHA payment rate.

Industry veterans expected a market basket figure between 3.2 and 3.7 percent, they tell Eli. The National Association for Home Care & Hospice was expecting a 3.6 percent figure, it says.

Instead, CMS pegged the inflation factor at the much lower 2.9 percent figure, which barely ex-ceeded the 2.75 percent case mix creep reduction. "I was certainly hoping for a higher market basket to offset more of the creep cut," says Bob Wardwell with the Visiting Nurse Associations of America.

"The real damage ... is the case mix creep adjustment wiping out so much of what would otherwise have been included in an update," says financial consultant Rick Ingber with VantaHealth Consulting. "This will bring home to HHAs the magnitude of what CMS has done here."

Politics as usual: Political maneuvering is likely partially to blame for the flat rates next year, experts believe. Sympathetic CMS officials were probably "hemmed in by the folks in the White House Budget Office, who are too removed from reality to appreciate the impact of freezing home care revenues in a time of inflation and recession," contends Wardwell, a former top CMS official.

The cut is "a back door way to reduce payments without having to go through regulation means and public comments," fumes financial consultant Tom Boyd with Boyd & Nicholas in Rohn-ert Park, Calif. The Medicare Payment Advisory Commission repeatedly beating the drum about high HHA profit margins hasn't helped the industry's case, Boyd expects.

Bad reputation: The egregious fraud in Florida over outliers has also put the industry behind the eight ball (see related story, p. 307), Laff believes.

The result of the essentially flat 2009 payments will be reduced access for beneficiaries, experts agree. Staff cuts and reduced service areas are inevitable for many providers, Wardwell predicts. That's especially true for agencies that currently are hanging on by only a thread -- often small, rural, or non-profit providers.

Expect to see closures of hospital-based and non-profit agencies, Boyd advises.

"Providers will be challenged to maintain profitability levels consistent with the past seven years as their rates stay relatively flat," expects consultant Mark Sharp with BKD in Springfield, Mo.

"While this is bad news for our VNAs, it's even worse news for people who need our care," Wardwell says. "And tough economic times brings more people to our VNAs. It's so sad, so cruel, and so unnecessary."

Losers: By provider type, this rate update will hit freestanding non-profits the hardest, CMS calculates. As a group, their rates will actually decrease 0.01 percent in 2009, according to the notice. Within that group, rural freestanding non-profits will do the worst with a 0.07 percent reduction in payments altogether.

Other groups that will see reductions include agencies in the Midwest (0.44 percent less) and North (0.08 percent less), the notice says.

Winners: Although the flat rates will hurt everyone, some groups will be less affected than others. The provider type with the highest increase is facility-based government agencies with a 0.25 percent aggregate increase. HHAs in the West will see a 1.56 percent increase, mostly due to wage index increases, CMS notes.

Size-wise, agencies with 50 to 99 first episodes will fare the best with a 0.50 percent increase as a group. HHAs with 200 or more first episodes will fare the worst with a slight 0.04 percent increase.

CMS has two more years of case mix creep cuts planned under its rule on the matter from last year, at 2.75 percent and 2.71 percent for 2010 and 2011, respectively. But agencies shouldn't count on the cuts ending there. "We will continue to monitor any changes in case-mix," CMS warns in the notice. And HHAs shouldn't count on the next two years' rates remaining the same. The agency "may revise the percentage reductions to the HH PPS rates in future rulemaking," it says.

"We're going to be in for some tough times," Laff warns.

"Inflation in costs will not be covered by traditional increases in the Medicare rates," Sharp counsels. "Providers will have to be creative and continue to look for ways to decrease costs."

Legal hopes: NAHC's lawsuit against the case mix creep cut is ongoing, the trade group reports. A resolution may come by mid-2009, it expects.

NAHC, VNAA, and other industry lobbyists will continue to press lawmakers to block the cuts, they say.

Note: The rate notice is at http://edocket.access.gpo.gov/2008/pdf/E8-26142.pdf, or email editor Rebecca Johnson at rebeccaj@eliresearch.com with "PPS 2009 Notice" in the subject line for a free PDF copy.