Home Health & Hospice Week

Cut could push rural providers out of business, reps predict.

The financial picture is bleak for rural home health agencies, and it's only going to get worse now that the 5 percent rural add-on expired March 31.

So say industry representatives from around the nation on the eve of the add-on's sunset. Many states have quite large percentages of their HHAs in rural areas. Even more patients reside in rural areas, notes Melanie Golson with the Home Care Association of Alabama - so if an HHA is in a Metropolitan Statistical Area, it still has to bill the rural rate based on the patient's location.

Many HHAs in rural areas are hospital-based, points out Kimberle Hall with the Nebraska Association of Home and Community Health Agencies. And many agencies in Kansas are based in health departments, notes Linda Lubensky with the Kansas Home Care Association.

Rural agencies' costs are higher than their urban counterparts for a number of reasons, reps note. For one, they tend to be small with no economies of scale. "We all know that a patient census has to achieve a certain, consistent number to cover costs, and that is just not realistic for many of our communities," stresses Casey Blumenthal with the MHA - An Association of Montana Health Care Providers.

Profit margins for rural HHAs are very low or often negative, reps say. For example, Montana's average HHA margin, based on cost report figures calculated by the National Association for Home Care & Hospice, is about negative 11 percent, Blumenthal reports.

"Our rural agencies are already operating in the negative, so the loss of the rural add-on will only impact them more," Hall laments.

And overhead for rural agencies is also high because they have to travel long distances to see patients, says Harvey Zuckerberg with the Michigan Home Health Association. That translates to fewer visits furnished and lower staff productivity.

Many rural HHAs' financial health suffers because they aren't discriminating in accepting patients. They "generally do not turn any patients away, no matter the drain on agency resources," Lubensky observes.

In New York, HHAs are often the sole source of health care in certain communities, says Pat Conole with the Home Care Association of New York State.

Other factors: Wage index decreases in Ken-tucky have compounded rural agencies' financial problems, reports Karen Hinkle with the Kentucky Home Health Association. Rural Kentucky HHAs' index is nearly 3 percent lower in 2005 than 2004, Hinkle tells Eli.

Low Medicaid rates also exacerbate agencies' financial difficulties. For example, Medicaid home care rates in Kentucky have been frozen for four years, Hinkle says. "Right now a number of agencies are considering limiting, if not dropping, some of their Medicaid business just to cut their losses."

And the escalating price of gasoline plagues rural agencies, notes Kathleen Anderson with the Ohio Council for Home Care. With further distances to travel, gas increases have a disproportionate impact.

Restricted Access, Shuttered HHAs on the Horizon

With all of the financial burdens rural agencies already are bearing, the elimination of the 5 percent increase to Medicare payments may spell the end of some rural HHAs. "I am hearing from more and more providers who feel their financial picture is as bleak as it has been since [the interim payment system]," Hinkle says.

About one-third of Medicare-certified agencies went out of business under IPS. "We now have 14 counties that do not have [home health] services," Montana's Blumenthal notes.

"We lost a large number of small agencies in the rural areas due to the 1997 Medicare cuts," Ohio's Lubensky recounts.

And more closures could be at hand. "The loss of the rural add-on may send other agencies over the edge," Blumenthal predicts. "We've lost a couple per year since [the prospective payment system began], and this will likely precipitate another wave."

Hospitals in Kansas are shedding their home care units, and that trend is likely to continue under the payment cut, Lubensky forecasts.

Even if the reimbursement cut doesn't force agencies to close their doors altogether, it will force them to become more selective about the patients they accept and/or the geographic areas they serve, reps expect.

HHAs already are serving fewer zip codes today than last year, according to the Medicare Payment Advisory Commission, notes William Dombi with the National Association for Home Care & Hospice. "That is the unfortunate result of payment rates that are inadequate," Dombi tells Eli.

When patients can't get home care, they'll end up in costlier hospital and nursing home settings, predicts Anderson.

Rural HHAs will also have a harder time competing for workers with limited resources. "Ohio is already feeling the effect of decreases in staffing due to the workforce shortage," Anderson says. "If the agency cannot pay a competitive wage, fewer patients can be served."

Hopes for Reinstatement Continue

HHAs hold out hope that Congress will reinstate the rural add-on, now that the chance for a continuous extension has passed, says Warren Hebert with the HomeCare Association of Louisiana. The add-on legislation will have to be part of a larger bill addressing Medicare issues, Dombi explains.

Such a bill isn't likely to come together until the end of the legislative session - if at all, notes attorney and lobbyist Jim Pyles with Powers Pyles Sutter & Verville in Washington, DC.

That means the soonest agencies will see relief is October, and the session may not end until December, says Carolyn Markey with the Visiting Nurse Associations of America. "It's not going to happen any time soon," Markey judges.

Although some lawmakers favor the idea of a retroactive reinstatement, boosting payments back to April 1 is unlikely to occur. Because of that, "we are looking to find any means possible to reinstate the add-on as early as possible," Dombi says.

But HHAs will have to compete with other interests, including larger health care providers, to secure passage of the add-on reinstatement, Zuckerberg points out. In this budget-cutting year, that may be hard to do.

Industry reps urge HHAs to lobby their members of Congress to support reinstatement of the add-on.