Prospective Payment System:
MedPAC Deflates Industry's Hopes For Inflation Increase
Published on Fri Dec 17, 2004
Influential advisory body wants freeze despite 20 percent of HHAs in the red. You'll have to tighten your budget belt a few notches in 2006, if the Medicare Payment Advisory Commission gets its way.
The advisory body to Congress appears set to recommend no inflation update to Medicare home health agency payment rates, according to its Dec. 9 meeting in Washington, DC.
Why: MedPAC's latest data shows one-quarter of freestanding HHAs have Medicare profit margins of more than 25 percent. In addition to increasing numbers of agencies entering the program, good beneficiary access to services and sustained quality of care, the margins show there's plenty of money in the home health PPS system and no need for more, MedPAC staff claim.
But the commission's cost data also show 20 percent of agencies have negative margins. Those agencies obviously won't fare well under rate freezes, and some commissioners are taking notice.
Former Centers for Medicare & Medicaid Services Administrator and current Commissioner Nancy-Ann DeParle questioned MedPAC's profit margin data as compared to that offered by the National Association for Home Care & Hospice. HHAs say "their margins are much smaller than the numbers we're looking at," DeParle noted in the meeting.
MedPAC's numbers, which project an average 12.1 percent agency profit margin for 2005, don't include hospital-based data and give larger agencies' cost data more weight than small agencies, staffers admitted. "When you are talking about these tiny home health agencies that may not even be anywhere near efficient units, I don't think you want your payment policy driven by lots of very small units," added MedPAC Chair Glenn Hackbarth.
Margin figures indicate the problem lies not with how much money is in the PPS system, but in how that money is distributed, Hackbarth maintained. The issue is "whether we are getting the dollars to the right places and [whether] they accurately track with the cost of treating different types of patients," he noted. Recommending a rate freeze doesn't indicate "everything is hunky-dory in the home health world," he insisted.
Commissioners should save their concerns about home health PPS case mix weighting for a slated November 2005 report, Hackbarth implied while pushing the no-increase recommendation. "I don't think the issues here are so much about the aggregate level of money flowing into the home health industry from Medicare, but rather the distribution of those dollars," he said.
It was "refreshing" and "encouraging to see some commissioners question staff analysis and raise questions about the increasing number of agencies that are not achieving high margins," cheers Bob Wardwell with the Visiting Nurse Associations of America. MedPAC staff underestimate how much low profit margins hurt HHAs, because facilities like nursing homes and hospitals have so much "cost" that is really depreciation, [...]
