Home Health & Hospice Week

The hits to earnings that home health agencies are taking due to new regulatory requirements may be just the beginning as budget negotiations get underway.

As each party in Congress identifies its representatives for the committee that will propose budget cuts, speculation abounds on exactly what cuts will emerge from the committee formed by the debt ceiling deal.

"There's a sense with all the deficit-reduction issues that have been spawned by the debt-ceiling drama that if there are areas that are going to get cut that are really easy targets, then home nursing is one of them," said Arthur Henderson, a Nashville, Tennessee-based analyst at Jefferies & Co., according to the San Francisco Chronicle.

Any cuts will be hard for HHAs to handle on top of the financial pressures imposed under the face-to-face and therapy reassessment requirements that hit in the second quarter of 2011.

Home health giant Gentiva Health Services Inc. cites those regulatory pressures in releasing its second quarter earnings. "Difficult operating conditions driven by the implementation of new regulations impacted our volume and profitability levels this quarter," Gentiva CEO Tony Strange says in the Atlanta-based company's earnings release.

"This has been a challenging quarter for Gentiva and our industry as a whole," Strange said in a conference call Aug. 4, the Chronicle reports. "The complexity of the new regulatory requirements, along with the overall softness in healthcare services volumes, has impacted our ability to meet our growth expectations." Gentiva reduced its earnings guidance for the year and the company's stock  price tumbled more than 60 percent.

Gentiva reported net income of $5.3 million on revenues of $456.9 million for the quarter ended June 30, compared to an $18.9 million profit on $297.1 million in revenues for the same time in 2010. Gentiva bought hospice chain Odyssey Healthcare Inc. in the interim. Home nursing revenues decreased from $228.7 million to $219.8 million during that time period.

Regional chain LHC Group Inc. also saw an earnings drop compared to last year. The Lafayette, La.-based company reported net income of $12.8 million on revenues of $161.0 million for the second quarter, compared to a $16.3 million profit on $153.6 million in revenues for the same quarter in 2010.

LHC has been working through "significant reimbursement and regulatory changes," CEO Keith Myers says in a release. The F2F requirement and 2010 rate cut have "resulted in significant pressure on volume growth, revenue and internal resources," he says.

Budget cuts may be hanging over HHAs' heads, but a new copayment requirement may be less of a threat due to the debt ceiling deal enacted last month.

Medicare beneficiary benefits -- but not Medicare provider payments -- were exempted from the across-the-board 2 percent cut to federal government programs if the congressional committee fails to report out a budget-cutting proposal, points out the National Association for Home Care & Hospice. "It is believed that cost shifting to seniors such as the imposition of a home health copay would be a beneficiary cut and thus off limits" under the 2 percent cut, NAHC points out.

However: The congressional committee "has wide latitude to propose home health and hospice cuts and copays," the trade group warns. Providers should lobby and educate their representatives to head off cuts harmful to beneficiaries and those who serve them, NAHC urges.