Home Health & Hospice Week

Tip: Know your stats like the back of your hand.

Now that rebasing cuts have hit, you need to examine how to survive — and thrive — under the reduced reimbursement Medicare has implemented.

Reminder: In its Home Health PPS Final Rule published in the Dec. 2 Federal Register, the Cen-ters for Medicare & Medicaid Services finalized a 14 percent cut to Medicare home health agency rates over the next four years. The first 3.5 percent cut took effect Jan. 6 (see Eli’s HCW, Vol. XXII, No. 42).

The reductions are "an attempted dismantling of the Medicare home health benefit," Val Hal-amandaris insisted in a National Association for Home Care & Hospice teleconference about the rule after CMS released it. The rebasing cuts, which reduce HHA payments by the maximum amount allowed by law, are a backdoor method of achieving "shrinkage" of the industry, NAHC’s Halamandaris said. That industry has boomed since its decimation under the interim payment system in the late 1990s.

CMS claims it is cutting HHA rates only 1 percent. But that is compared to 2013 rates, noted NAHC’s William Dombi in the conference. When compared to what rates would have been this year, the cut is the full 3.5 percent. "Should anybody tell you that it’s only a 1.05 percent reduction, that is really grossly misleading," Dombi said.

Estimates show that under rebasing, 43 percent of HHAs will have negative Medicare profit margins by 2017, points out Tracey Moorhead with the Visiting Nurse Associations of America on the trade group’s website.

"I cannot remember a single regulation … that forces 43 percent of an industry out of business," Halamandaris commented.

Providers, NAHC, VNAA and other industry members and representatives are hard at work trying to persuade Congress to avert the subsequent years of rebasing cuts. "I hope to see this thing reversed or modified before the next cut is phased in," Robert Wardwell, the architect of PPS at CMS who now works with VNAA, told Eli when the rule was released.

NAHC is also considering legal challenges to the rule, Halamandaris said.

But in the meantime, your agency has to figure out how to run under the reduced rates now in place. Consider these measures offered by Robert Simione of Simione Healthcare Consultants in the NAHC teleconference to keep your doors open under the punishing new rates:

1. Assess the rule’s impact. If you haven’t done so yet, you should get right on determining the rule’s impact to your revenues and profit margins.

"Definitely if it’s impacting the top line on the revenue side, it’s going to impact their gross profit margins," Simione noted.

2. Get specific. Don’t just look at the overall numbers for your assessment. Analyze the different types of episodes — full, LUPAs, and outliers — to determine how much money you expect to make or lose on each type, Simione advised. Partial episode payment (PEP) adjustment episodes also figure in.

If you wrangle the data — or pay someone to do it for you — you can conduct the same analysis based on other characteristics: HHRGs, diagnosis groups, site of service, etc., experts note.

3. Manage your money-losers. When you know which type of episodes are costing rather than making you money, you can work to minimize them so they won’t put your agency under water.

For example: LUPA and outlier episodes typically lose money, Dombi noted in the call. Data shows that LUPA, PEP and outlier episodes generally cost about twice as much as the amount an agency is paid for them, Dombi said. Managing these costly episodes, to the extent possible, "can be a good return on investment," he counseled.

However: "You don’t want to discriminate wrongfully" by turning away LUPA and outlier pa-tients, Dombi added.

4. Cut costs. The key to surviving rebasing is cutting your direct costs, Simione spelled out. There are many areas you can explore to achieve this goal while still maintaining quality care, including:

• productivity
• supplies
• transportation
• administrative processes.

5. Face compensation adjustments head on. One of the toughest direct cost areas to reduce is salaries and benefits, Simione acknowledged. But with compensation making up about 80 percent of agencies’ cost of delivering care, "these are some of the areas that we’re all going to explore in great depth," Dombi noted.

Problem: Many agencies already have frozen staff salaries and benefits to combat previous year’s reimbursement shortfalls. You want to keep staff happy because you can’t generate revenue, and achieve good patient outcomes, without them, Dombi noted.

"We’re going to really have to look at salary increases, and possibly make some hard decisions there," Simione advised. "But how long can we continue asking our employees to take the impact of all this?"

6. Address visit utilization per episode. Another touchy area for cost cutting is utilization. But you need to examine visits to make sure they are necessary. "If there is any way we can reduce the number of visits per episode without impacting quality and positive outcomes, that could be a potential for offsetting some of these cuts on that side," Simione suggested.

Think of it this way: Since the beginning of PPS, HHAs have averaged 17 to 18 visits for non-PEP, non-outlier episodes, Dombi said. The amount CMS has reduced rates in 2014 is equal to about half-a-visit’s reimbursement.

Bottom line: "You obviously don’t want to compromise care by reducing visits," Dombi said.

7. Make a plan. While the industry is fighting rebasing cuts, you can’t count on their demise. You should make a plan that covers the next four years of rebasing cuts, as well as the 2 percent sequestration reduction. Dombi expects sequestration to stay in place at least one more year.

Plus: You shouldn’t be surprised to see CMS use more "productivity" cuts in future years, Simione added.

8. Emphasize capital. Most agencies rely on their Medicare margins for capital needed to undertake new initiatives. "Without margins, we really don’t have capital," Simione observed. "We need to look to where that capital is going to come from in order to invest in technology to also reduce our costs."

9. Plan growth. To achieve economies of scale and efficiencies, you will need to grow your business, Simione advised. But not just any growth will do. You have to strategize carefully to attain the type of expansion that is beneficial for your agency (see story, p. 12).

10. Analyze ROI. Any new initiatives must undergo a rigorous return on investment analysis, Simione urged.

Note: You can purchase the 2014 Pro-spective Payment System Final Rule Handbook at www.codinginstitute.com/2014-prospective-payment-system-final-rule-handbook.html or by calling 1-800-874-9180. The 2014 PPS final rule is at www.gpo.gov/fdsys/pkg/FR-2013-12-02/pdf/2013-28457.pdf. The CMS transmittal implementing the rates is at www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/R2820CP.pdf.