Home Health & Hospice Week

PDGM rate reduction necessary, Commission says.

If you’re hoping the imminent Home Health Prospective Payment System proposed rule for 2020 will contain an elimination of the so-called behavioral adjustment rate cut for the Patient-Driven Groupings Model, a look back at a recent MedPAC report may disabuse you of that notion.

As expected, the Medicare Payment Advisory Commission recommended a 5 percent reduction in home health Medicare payments in 2020 in its March report to Congress. The 5 percent cut would slash up to $2 billion from home health spending in 2020 and up to $10 billion over five years.

The 5 percent rate cut is steep enough. But the Commission also signaled its support for the so-called “behavioral adjustment” under the Patient-Driven Groupings Model. The Centers for Medicare & Medicaid Services has indicated it will reduce pay rates under PDGM to account for behavioral changes home health agencies will make in response to the new payment model.

The adjustment, which CMS has estimated at 6.42 percent, “is necessary to offset the spending increase expected in 2020 resulting from the behavioral changes,” MedPAC said in its March report. The adjustment will strip about $1 billion from home health spending. (CMS’s argument is that HHAs will add $1 billion to spending with their behavioral changes, thus necessitating the adjustment.)

Many home health commenters on the PDGM proposed rule furnished blistering feedback about the behavioral adjustment, and the industry has mounted a campaign to head up the preemptive cuts.

For example: Companion bills in the U.S. House of Representatives and Senate, H.R. 2573 and S. 433, would require CMS to have evidence of behavior changes before making related rate adjustments. The legislation would also limit behavioral adjustments to 2 percent per year to provide stability.

Industry observers are hopeful that CMS will withdraw its preemptory cut in the face of opposition, but MedPAC support of the reduction may make that less likely.

In its March report, MedPAC spent a good deal of time justifying why HHA rates should be lowered. To begin, it said rates were set much too high at PPS’s outset. “In 2001, the first full year of the PPS, average Medicare margins for freestanding HHAs equaled 23 percent,” the Commission points out. “The high margins in the first year suggest that the PPS established a base rate well in excess of costs.”

How did that happen? The original PPS “base rate assumed that the average number of visits per episode between 1998 and 2001 would decline about 15 percent, while the actual decline was about 32 percent,” MedPAC said. “In addition, HHAs have been able to hold the rate of episode cost growth below 1 percent in many years, lower than the rate of inflation assumed in the home health payment update,” the Commission added. “Consequently, HHAs were able to garner extremely high average payments relative to the cost of services provided.”

Between 2001 and 2016, freestanding HHA profit margins averaged 16.3 percent, the report highlighted.

MedPAC also pointed out that HHA profit margins remain high. HHAs averaged a 15.2 percent margin in 2017, and are expected to climb to a 16.0 percent margin in 2019.

Further, MedPAC pointed out changes it deems undesirable — a higher ratio of for-profit providers and a shift to more episodes that aren’t preceded by a hospital stay.

The report also spent some time on the industry’s problems with fraud and abuse. “Program integrity is a continuing challenge in home health care,” MedPAC stressed, noting the moratorium on new HHAs that was formerly in place in four states and “numerous criminal prosecutions for home health fraud, most notably in Miami and Detroit.”

MedPAC also highlighted the Pre-Claim Review demonstration that ran in Illinois, which cut about $100 million from home health spending in that state over 10 months ending in 2017.

“Medicare payments are substantially in excess of costs,” MedPAC pronounced. “The Commission has concluded that home health payments should be significantly reduced,” it adds. “Substantial margins for many agencies are likely to remain.”

Further, “Medicare’s payments for home health services are too high, and these overpayments diminish the service’s value as a substitute for more costly services,” MedPAC contended. “There are also some indications that utilization under fee-for-service is not always efficient, as suggested by the broad geographic variation in the use of the benefit.”

MedPAC suggested that lawmakers should take a look at alternative payment models for cues on how to deal with home health. “A recent analysis of home health care utilization in the Medicare’s Shared Savings Program found that utilization dropped significantly for patients enrolled in a Medicare accountable care organization,” the Commission pointed out.

The Commission also raised the idea of a copayment again, particularly for episodes not preceded by a hospital stay.

Turn Words Into Action

In contrast to the picture that MedPAC paints is the reality of some of the benchmarks included in the report.

For example: A number of key indicators, including the number of HHAs, total spending, users, and the percent of beneficiaries using home health, are down (see more data details in box, p. 171). In fact, the number of episodes per user has been declining for five years, since 2012, MedPAC acknowledged.

And the industry has long taken issue with MedPAC’s calculation of profit margin, for reasons ranging from inaccurate cost report data to exclusion of hospital-based providers.

“Home care of all types is more frequently described as the future of health care, including containment of costs,” says Washington, D.C.-based healthcare attorney Elizabeth Hogue. “The home care industry has known that this is the case for a long time,” Hogue emphasizes. “It seems consistent then for more resources to be invested in home care. And yet, MedPAC proposes a 5 percent reduction for home health agencies and a 2 percent reduction for hospices,” she notes.

“These recommendations seem grossly inconsistent with more clearly stated policy objectives of CMS and others to encourage the use of home care in the future,” Hogue criticizes.

Further, “it seems that MedPAC should applaud greater use of home care as opposed to what seems like a negative characterization of higher utilization, especially in light of an increasing number of baby boomers,” Hogue adds.

Bottom line: “Policymakers and regulators have, or at least give lip service to, the value of home care but their actions do not reflect an understanding of the reality of its value,” Hogue tells Eli. “Time to get it straight,” she stresses.

“Congress is not obliged to accept the recommendations of MedPAC,” the National Association for Home Care & Hospice says in its member newsletter. “NAHC will continue to advocate against any rate cuts for home health providers.”