Home Health & Hospice Week

HHA cuts will be closer to 4% next year, expert claims.

When the PPS final rule comes out in a month or so, providers are hoping it won’t contain the devastating cuts contained in this summer’s proposal — but those hopes are likely to be in vain.

Back in July, the Centers for Medicare & Medicaid Services proposed a 3.5 percent cut to home health agencies’ Medicare payment rates over the next four years. That will total a 14 percent cut from 2014 to 2017 (see Eli’s HCW, Vol. XXII, No. 34).

Details: The calendar year 2014 base rate will be $2,860.20 if the proposal is finalized as is ($2,946.01 in rural areas). That’s up a significant amount from the current $2,137.73. But don’t get too excited — CMS also wants to slash all case mix weights so that the average weight of 1.3517 is now 1.00, the agency says in the proposed rule.

Combined with an inflation update and other factors, CMS claims the overall cut for HHAs will be 1.5 percent next year.

But Pat Laff with Laff Associates in Hilton Head Island, S.C., says that figure is off the mark. When you compare the base rates from 2013 to 2014 and factor out the case mix changes, it’s really a 3.94 percent reduction, Laff tells Eli.

For HHAs that will see their wage index go down, the cut will be even more painful, Laff warns. And the 2 percent sequestration reduction is likely to continue hitting agencies’ bottom line.

Cuts On Top Of Cuts

The drastic reductions proposed by CMS has the industry up in arms, and they gave the agency an earful in the comments they submitted on the proposed rule last month.

"Home care has already sustained damaging cuts in the form of reduced reimbursement rates and recent regulations," the Texas Association for Home Care & Hospice tells CMS. "Since 2009 when home care was a $17 billion industry, our providers have received disproportionate cuts to the tune of $77 billion (including $39.7 billion in the Patient Protection and Afford-able Care Act [ACA]) to take effect over the subsequent 10-year period."

If the rule goes forward as proposed, almost half of the HHAs in Texas will have negative Medicare profit margins in 2014, TAHC&H warns in its comment letter.

In New York, HHAs’ Medicare profit margins already have been negative the past 11 years in a row, according to cost report data, the Home Care Association of New York State tells CMS in its comment letter. "According to an analysis by Ava-lere Health and Dobson DaVanzo & Associates, New York is among 13 states whose Medicare margins will plunge deeper into the red as a result of CMS’s proposed 2014 PPS rebasing," HCANYS’s Pat Conole says in the letter.

Anecdotes Drive Home Hardship Message

National Association for Home Care & Hospice analysis demonstrates that more than 70 percent of existing HHAs will be paid less than the cost of care under the proposed rule, the trade group says in its comment letter. "This proposal will have natural and foreseeable effect of eliminating access to care in much of the country," NAHC insists.

One nurse’s story: "I am an RN working for a not-for-profit VNA that services a large rural area in New Hampshire," one nurse says in her comment letter on the rule. "Under the present Medicare payment plan, we are barely able to provide health care for the people in our towns. Many times the cost of medical supplies, … extra mileage to reach many of these people, and unplanned visits needed to ensure ‘safe’ treatment of our patients far surpasses our allotted payment from Medicare for a certification period," she says. "Under the proposed payment plan, we would no longer be able to offer services to these patients."

From Texas: A family-owned new start-up warns CMS of the "negative effect" the cuts will have on her agency. "Proposed cuts … will make it much harder to provide the best quality care that these patients require and deserve," the provider says. "Cutting the reimbursements will make it much more difficult for our home-grown business to survive."

"We don’t have the patient load that [larger companies] do, and we are afraid that we may not be able to survive if these cuts are made," says the agency that hasn’t even started billing Medicare yet.

From California: "Continuous reductions in reimbursement have already led us to decrease the geographic area we are able to serve," Pioneer Home Health Care’s Pat West reports in her comment letter. The Bishop, Calif. agency has cut back on serving nine rural communities because "it is extremely expensive to drive to these outlying areas," she says. "The continuous reduction in reimbursement is the sole reason that beneficiaries living in these areas are turned away when needing our care."

"Our own data shows that 42 percent of our care episodes cost more than we are reimbursed," West tells CMS. "Our present profit margin is 0.2 percent. A 14 percent reimbursement cut over the next 4 years will be unsustainable."

From Michigan: Great Lakes Caring HHA and hospice in Jackson will see its growth fall from 17 percent a year to 7 percent, CEO William Deary recently told the Crain’s Detroit Business newspaper. "The issue is, ‘Do providers have enough scale to grow through the cuts?’ Many companies don’t," he said. "In the past, I took care of five pa-tients to earn $1. Now I will have to take care of 10 patients to make that $1."

In July, Henry Ford Home Health in De-troit was forced to eliminate its maternal and child home health program for about 2,000 mothers, Greg Solecki, Henry Ford’s VP of home health, told Crain’s. "After 31 years, if Medicare is cutting us, we just decided we can’t afford to provide under- or uncompensated care programs. You will see this with other providers," he predicted.

Home health agency employees are feeling the pinch every time CMS ratchets down reimbursement levels, multiple commenters say. Brockton Visiting Nurse Association in Massachusetts will have to take measures such as freezing pay increases (which are already minimal); laying off back office employees; reducing back office employees’ work day; not paying into employee pensions; and furloughing back office employees, reports the VNA’s Beverly Pavasaris.

"Part of our company’s ethic is to selectively hire and well compensate our staff, in order to have the best people, providing the best care," one Texas HHA says. "Having a smaller operating budget will make it more difficult to attract and retain quality staff."

Another casualty of reduced budgets are new programs that can improve patient outcomes and achieve financial goals such as reducing hospital readmissions, multiple commenters point out in their letters.

"During this time of unprecedented change in the health care system, our home health providers must continue to remain in a position to aptly assist their acute and post-acute partners in care transitions and provide services that keep beneficiaries out of more costly acute care settings," stresses the California Hospital Association in its letter. "We urge CMS to consider the current trend in decreasing Medicare margins and to ensure that such a significant rebasing does not unravel a critical component in our continuum of care. If we are to be successful in transforming care delivery, then providers need the adequate resources to make those necessary changes that go above and beyond the cost of providing services."

Bottom line: "Home health providers must have the resources to build infrastructure for sharing data, tracking patients and working with their partners in the community to continue to provide high quality care," the hospital trade group says.

"How do we fund the development of those programs, provide education to the employees who will be part of those programs and hire the appropriate qualified employees to work within those programs" if the funding is cut, Brockton VNA asks.

Representatives from agencies serving rural areas, therapy patients, low-income and dual eligible populations, and other specialty groups stressed that their services to these often at-risk patient pools would be reduced by budget cuts.

Commenters Take Aim At CMS’s Methods

Industry members had plenty to say about CMS’s approach to the proposals that are set to take effect Jan. 1.

Dignity Health system in California urges CMS to "recalculate the rebasing cut to account for the current costs of providing HH services to Medicare beneficiaries and to offer HH agencies a fair opportunity to generate a margin needed to make the ongoing investments that are necessary to maintain and improve patient care."

While not required by the ACA, CMS has stated that its goal is to reset average HHA Medicare margins under home health PPS to zero, Dignity continues. "CMS neither explains the rationale for pursuing a zero margin through HH rebasing, nor addresses the related, indirect assertion that agencies require no margin to sustain, much less improve, quality services for patients and maintain operations." All health care providers require a margin to be able to adopt critical improvements and meet new regulatory requirements, Dignity maintains.

Many commenters criticized CMS for the data used for rebasing, particularly how CMS culled the data from cost reports. One problem was the small pool of cost reports created because so many reports weren’t up to standard.

But even the reports that stayed in the pool were problematic, many commenters warn. "Home health agencies have no incentive for ensuring the accuracy of their cost reports," notes the Midwest Care Alliance. "The data derived from them is woefully inaccurate and not representative of the costs that agencies actually incur." There is no way to determine the accuracy of those reports that remained in the sample, only that they didn’t meet the low bar for legitimacy set by CMS, MCA says.

Even sound reports don’t include a vast array of legitimate expenses that HHAs must incur, commenters agree (see box, p. 267, for a partial list of those expenses Medicare doesn’t consider).

Note: The proposed rule is at www.gpo.gov/fdsys/pkg/FR-2013-07-03/pdf/2013-15766.pdf. To read the 96 comment letters submitted, go to www.regulations.gov/#!docketDetail;D=CMS-2013-0140 and scroll down to the "Comments" section.