Home Health & Hospice Week

VBP incentive must be of ‘sufficient magnitude,’ Medicare says.

Home health agencies have made clear their desire to ease into Value-Based Purchasing by limiting the size of the potential adjustments, but Medicare hasn’t gone for the idea.

Then: In the 2015 proposed and final HH PPS rules, the Centers for Medicare & Medicaid Services floated the idea of a 5 to 8 percent adjustment, either up or down, based on VBP scores. In commenting on the proposed rule, many HHAs and industry representatives blasted that number as far too high.

Now: In the 2016 proposed rule released July 6, CMS has stuck to its guns on the 5 to 8 percent penalty/reward amount (see related story, p. 186).

“No commenters provided strong counterpoints or alternative design options which dissuaded CMS from moving forward with general design and framework of the HHVBP model as discussed in the CY 2015 HH PPS proposed rule,” CMS defends in the 2016 rule. The incentive needs to be of “sufficient magnitude” to be motivational for providers, the agency says in the rule. “The HHVBP model being proposed would offer both a greater potential reward for high performing HHAs as well as a greater potential downside risk for low performing HHAs,” as compared with the Hospital VBP program that uses only a 1.5 percent adjustment currently (going up to 2 percent in 2017).

Look At The Ratios

The adjustment factor for home health may seem large at first glance, notes financial expert Pat Laff with Laff Associates in Hilton Head Island, S.C. But if you look at the average Medicare profit margins of hospitals versus home health, the reward/penalty pool is more in line, Laff tells Eli.

Hospitals had a Medicare profit margin of negative 5.4 percent in 2012, according to the Medicare Payment Advisory Commission. In contrast, HHAs recorded a 10.1 percent Medicare profit margin that year, MedPAC says.

Remember: CMS is not looking at overall HHA profit margins. “They don’t care if you subsidize Medicaid or private insurance with your Medicare profits,” Laff notes. “That’s your problem.”

Laff says he expects the 5-to-8 percent pool to remain in the final rule. “There has been too much concern over the level of profitability in home health” for CMS to change it, he believes.